On inequality, let’s do the Palma (because the Gini is so last century)

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Brazil v South Africa: what can the BRICS tell us about overcoming inequality?

March 20, 2013
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The blog’s inequality week here in South Africa continues with some thoughts on inequality and the BRICS. An edited version of tBRICS-Summit-Durbanhis post appeared earlier this week on the FT’s Beyond BRICS blog

The acronym may have been cooked up in far-off New York, but the BRICS grouping of countries is starting to generate some interesting life of its own. Last week, I was in Durban, chairing a discussion between academics and activists from South Africa and Brazil ahead of the BRICS summit later this month. The topic? ‘Tackling inequality across BRICS’.

The starting point was Brazilian exceptionalism. Long held up as exhibit A in Latin America’s gross distortions of wealth, Brazil is now the only BRIC where inequality is falling (and fast – see chart). In the wider G20 group of leading economies, only 4 can boast falling inequality levels; three of them – Brazil, Argentina and Mexico – are Latin American.brics inequality 1990s v 2000s

The stats, captured in a new Oxfam briefing, published in conjunction with Rio’s BRICS Policy Center, are striking. Over the last decade, the incomes of the poorest Brazilians have risen more than five times faster than those of the richest (but both are rising – no zero sum games here). In the words of Brazilian poverty guru Ricardo Paes de Barros, “the incomes of individuals in the lowest decile of the income distribution is growing at Chinese rates, while the income of the richest decile grows at German rates”.

Even though GDP growth is sluggish, two weeks ago President Dilma Rousseff was able to announce the end of ‘registered extreme poverty’ – note her careful choice of words. Some Brazilian academics put this historic turnaround on a par with the New Deal in the US, or Britain’s post war creation of its welfare state.

The fine grain is just as encouraging: women’s incomes are rising faster than men’s; black people’s faster than whites’; the impoverished North-east faster than the rich South-east. Hunger is ‘largely dealt with’ according to Oxfam’s country director Simon Ticehurst, speaking in Durban, although food insecurity continues to plague communities in the northeast of Brazil. Near full employment is transforming lives, as people move from a day to day scrabble for survival into the better paid, more stable world of the formal economy. Brazil’s middle classes complain bitterly about having to pay more for maids, and even give them days off, as labour markets tighten.

inequality brazilNot that Brazil has become some kind of development nirvana: the quality of state education remains poor, large scale agriculture sucks up state subsidies on a far greater scale than those going to poor farmers; and despite the progress, the country is still in the world’s top 15 most unequal countries, twice as unequal as the OECD average.

Caveats aside, how did Brazil pull this off? Ticehurst and Adriana Erthal Abdenur of the BRICS Policy Center both stressed that such a transformation is complex and multi-tiered, involving all parts of state and society. This is most definitely not a magic bullet story of Brazil’s famous ‘Bolsa Familia’ social protection system, a programme of cash transfers to women in return for getting their kids vaccinated and keeping them in school, which has won admirers and imitators as far afield as New York City. UNDP estimates that such spending programmes account for under a fifth of the fall in inequality. Ticehurst argued that other critical factors include:

–          The transition from military rule to democracy, which bequeathed a constitution and political process attuned to the importance of basic rights, such as the right to food

–          The election of a centre-left government, led by Lula, committed to tackling poverty and inequality

–          Major increases in the minimum wage, the introduction of a universal pension (particularly important in deprived rural households)

–          An integrated and more effective public administration, working tightly across ministries and between the different levels of a federal, decentralized political system.

–          A high level of public participation, for example in holding 19 different ministries to account on Brazil’s ‘zero hunger’ effort to achieve universal access to food, through a virtuous circle of linking poor family farms to government procurement for school feeding programmes that in turn feed poor children.

–          Political and economic stability throughout the period of reforms.

In terms of economy and politics, Brazil is probably closer to South Africa than the other BRICS (commodity producer, democracy, transition from autocracy, centre left government) and the discussion inevitably centred on why South Africa has failed to emulate such successes. While there has OZATP-AFRICA-REPORT-20120511been substantial progress since the end of Apartheid on access to health, education and housing, inequality remains obstinately high and rising.

The two elements of Brazil’s success that South Africa seems to be missing (by a mile) are full employment and more competent administration. Patronage and corruption exist in both countries, but their extent in South Africa is undermining the state’s ability to implement policies, however well designed. Brazil, with its more diversified economy and public investments, seems able to generate jobs in a way that remains a distant dream in South Africa, which remains dependent on agribusiness and mining, neither of which generate the employment the country needs. Substantial land redistribution seems essential to tackling the jobs crisis, yet has been systematically postponed by the government in the interests of stability. Even those who manage to navigate the dilapidated education system and emerge with a degree still find it difficult to find jobs. Alarm bells are ringing, with observers warning of anything from a slow meltdown of the ANC government to an Arab Spring style uprising led by educated, jobless youth.

While all sides stressed that merely trying to transfer policies from one country to another seldom works, this kind of South-South exchange holds huge potential for helping the BRICS develop their own solutions to some of the problems such as inequality that continue to plague the old guard of the G8.

And here’s a 25m video summary of the Durban event


  1. It’s a relief to see the “magic bullet” story of the Bolsa Familia finally being put in its place. I’ve read countless articles in The Economist that point primarily to the (admittedly well-branded) Bolsa Familia as the main driver of inequality. As you rightly point out, the minimum wage (and particularly the fact it is the minimum for the the near-universal pension system)that has been perhaps the greatest direct driver of reducing inequality. I think you’ll be interested in this brief by Development Pathways(hot off the press)that shows this clearly: http://www.developmentpathways.co.uk/news/pathways%E2%80%99-perspectives-9-bolsa-unfamiliar-stephen-kidd-and-karishma-huda/

    The Brazil story and the role of right-based social protection leaves me with two big questions,

    1. If the success of countries like Brazil has been substantial investment in entitlements-based social protection, why is the social protection development debate still so narrowly focused on short-term poverty-targeted programmes that differ little from the poor laws that Europe rejected a century ago?

    2. If social protection is a core driver in reducing inequality, why has it been relatively marginal (especially rights-based social protection) from the current post-2015 debate which seems to be looking mainly at groups-based inequalities?

    Interested in yours and others’ thoughts.

    You may also be interested in a recent briefing HelpAge published comparing pensions in Brazil and South Africa: http://www.pension-watch.net/download/4f059575e1321

  2. Brazil´s reduction of inequality is indeed a major story, and I am glad we are all focusing on the labour market, minimum wages and some significant reforms in social policy. This is obviously important. At the same time, it is important to recognize some weakness of the current model if we want to avoid the love for miracles that has always dominated the literature:

    1. Is the data on the very rich in Brazil really credible? Is their relative income really going down sharply? I have doubts, particularly when one considers commodity prices, stock market valuations and the fact that managers in the financial sector makes receive higher wages in Sao Paolo than in New York or Hong Kong.

    2. What is the quality of employment we are creating? Are formal but job productivity jobs a concern? How can we try to improve in this area in the future? Or should we abandon our past concern on productivity?

    3. Are policies in this area changes significantly? Will the change in the future?

    My comments are not a call to focus on the glass “half-empty”; Brazil is indeed a successful case to study. But I think we need to focus more than we are doing on:

    a. How are the very rich (the top 1%) doing in different developing countries and what is their likely political and economic behaviour in the future.

    b. To what extent are economic and social policies changing in a way that they will create good jobs and better social services in the future. My coauthor Juliana Martínez Franzoni and I attempt to do this (http://www.desigualdades.net/bilder/Working_Paper/27_WP_Mart__nez_Franzoni_and_Sanchez-Ancochea_online.pdf) and find that economic policies are improving less than some redistributive ones in several Latin American countries.

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