Inequality in Brazil

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Brazil is almost as famous for its inequality as for its soccer. According toFacing Up to Inequality in Latin America, the IDB (1998) ranked both Brazil's total Gini coefficient1 (0.60) and its urban-only Gini coefficient (0.57) as the highest in the region. Its ratio of per-capita urban to per-capita rural household incomes (3.0) was also the highest in Latin America. The World Bank's point estimates for Gini coefficients, listed in Attacking Poverty (WDR 2001) for as many countries as the Bank dares, include only two countries higher than Brazil: Sierra Leone and the Central African Republic. There is very little doubt that Brazil has one of the most unequal income distributions in the world. Furthermore, while most fellow unequal societies - Sierra Leone, CAR, Paraguay and Guatemala – are relatively small countries, Brazil has the fifth largest population and the eighth largest GNP in the world. Poverty and Income Distribution: linked but different

Income inequality is not the same as poverty, although the two issues are closely related in Brazil's case. One can imagine, for example, a policy in Brazil that would eliminate poverty (by any absolute measure) and yet leave the income distribution highly uneven. Furthermore, measures to eliminate poverty are easier to envision because they focus on relatively easily identifiable subpopulations, such as… . Attacking income distribution, on the other hand, requires attention to the entire population. Most of the relevant debate in Brazil and abroad has been over eliminating poverty, not reducing income inequality. Because income distribution involves a relationship, not absolute levels of deprivation, moreover, it is more difficult to address. In this paper, we will review the current debate on inequality in Brazil by addressing the factors that may increase or reduce income inequality. Modern-Day Economic Causes of Brazil's Persistent Income Inequality The reasons for Brazil's enormous and persistent income inequality are obviously complex and can only be explored briefly in this paper. The first set of reasons stem from the nature of the world economy. In recent decades, income distribution has grown more unequal in general; the gap between “rich” and “poor” has widened even in developed economies such as the United States. The primary culprit is probably the increasing income gap between skilled and unskilled workers. That gap is especially notable in developing countries, which typically exhibit a labor surplus, a problem that became especially acute in Brazil's case with the post-1945 surge in population growth. Brazil since the 1920s, furthermore, has gone through a phase of rapid industrialization, which further contributes to the wage gap. The process of industrialization is capital- rather than labor-intensive, and industry therefore can afford to pay wages well above those of less prosperous employers. Because the productivity gains from industrialization tend to go disproportionately to the owners of capital, this further suppresses the labor share of national income. Yet another factor has been the mode of Brazil's entrance into the world economy. The country's continuing heavy dependence on primary, or agricultural, product exports, such as coffee, sugar, soy, and beef, right up to the present day, has meant that Brazil has not gained proportionately from the high value-added exports. On the other hand, industrial exports were among the keys to rapid growth (and improvement in income distribution) in the East Asian economies. Wages paid in Brazil's primary product sector have instead remained low because of the labor surplus. Historically, Brazil has always had a very powerful elite class. The “rich” have historically had the power to influence government policy—both taxes and benefits—to its economic advantage. Government policy on taxes and public benefits has consistently favored the 5 to 10% of the population who control most of the...
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