Brazil remains one of the countries with the greatest social and income inequality in the world, according to the new study released worldwide this Tuesday (7) by the World Inequality Lab (World Inequality Lab), which integrates the Paris School of Economics and is co-directed by French economist Thomas Piketty, author of the bestseller “Capital in the 21st Century”, among other books on the subject.
The new Report on Global Inequalities is the second carried out since 2018 and had the collaboration of around a hundred international researchers.
The 200-page document includes analysis of the impact of the Covid-19 pandemic, which has exacerbated billionaires’ increasing share of total global wealth. For the first time, the study includes data on gender and ecological inequalities (the carbon footprint between rich and poor countries, but also across income categories).
The study refers to Brazil as “one of the most unequal countries in the world” and says that the income gap in the country “has been marked by extreme levels for a long time”.
The text states that wage differences in the country have been reduced since 2000, thanks mainly to the Bolsa Família income transfer policy and the increase in the minimum wage. At the same time, extreme levels of equity inequality in the country have continued to rise since the mid-1990s.
“Among the more than 100 countries analyzed in the report, Brazil is one of the most unequal. After South Africa, it is the second with the greatest inequalities among G20 members,” Lucas Chancel, lead author of the report, told BBC News Brasil and co-director of the Global Inequalities Laboratory.
The following are five pieces of data from the new report that show why income and wealth inequality in Brazil is one of the highest in the world:
1. The richest 10% in Brazil earn almost 59% of the total national income
In Brazil, the national average income of the adult population, in terms of purchasing power parity (PPP), is 14 thousand euros, equivalent to R$ 43.7 thousand, according to the study authors’ calculations. . The richest 10% in Brazil, with an income of 81.9 thousand euros (R$ 253.9 thousand in PPP), represent 58.6% of the country’s total income. The study states that available statistics indicate that the richest 10% in Brazil have always earned more than half of the national income.
Chile, which is not part of the G20, has numbers equivalent (58.9%) to Brazil in relation to the share of income of the richest. The country has suffered in the last two years a wave of violent protests for better living conditions. In the United States, a country with strong social inequalities, the richest 10% earn 45% of the country’s general income, stresses Chancel. In China, this rate is 42%. In Europe, it is between 30% and 35%, completes the economist.
The richest 1% in Brazil, with an average income of 372,000 euros (almost R$1.2 million), in purchasing power parity, takes more than a quarter (26.6%) of national earnings.
2. The poorest 50% earn 29 times less than the richest 10%
The poorest half of the Brazilian population earns only 10% of the total national income. In practice, this means that the poorest 50% earn 29 times less than the richest 10% in Brazil. In France, this proportion is only 7 times.
“Bolsa Família managed to reduce part of the inequalities in the poorest layers of the population”, says Chancel. But due to the lack of in-depth tax reform, in addition to the agrarian one, income inequality in Brazil “remained virtually unchanged”, as the discrepancy remains at very high levels, the study points out.
3. The poorest half in Brazil own less than 1% of the country’s wealth
Property inequalities are even greater than income inequalities in Brazil and are one of the highest in the world. In 2021, the poorest 50% own only 0.4% of Brazil’s wealth (financial and non-financial assets, such as real estate). In Argentina, this slice of the population owns 5.7% of the country’s wealth.
4. The richest 1% owns almost half of the Brazilian patrimonial wealth
The richest 10% in Brazil own almost 80% of the country’s private equity. The concentration of capital is even greater among the ultra-rich, the wealthiest 1% of the population, who in 2021 own practically half (48.9%) of the national wealth. In the United States, the richest 1% owns 35% of the American fortune.
The report states that wealth inequality has grown in Brazil since the mid-1990s, in a context of financial deregulation and lack of broader fiscal reform.
According to the study, the wealth of 1% of the richest population on the planet has been growing between 6% and 9% a year since 1995, while, on average, the growth of all wealth generated in the world was 3.2% per year. That global increase, the report says, was exacerbated during the Covid-19 pandemic. Brazil followed this trend: the wealth of the richest 1% in Brazil rose from 48.5% in 2019 to 48.9% of total wealth in 2021, says Chancel, who considers the progression “significant”.
According to him, the ultra-rich in the world have increased their fortunes because there is a disconnect between the real economy, which has been severely affected by the health crisis, and the stock exchanges.
Tax system
The study on Global Inequality suggests policy options to redistribute income and wealth, such as progressive taxation of billionaires, which would allow investments in education, health and ecological transition. The text argues that the emergence of welfare states in the 20th century was linked to the increase in progressive taxes.
The lead author of the BBC News Brasil study argues that the lack of an ambitious tax reform in Brazil, which would make the tax system more progressive, makes it difficult to reduce inequalities.
Brazil is one of the few countries in the world that does not levy a tax on dividends (a portion of corporate profits distributed to shareholders), for example.
For Lucas Chancel, the creation of a tax on dividends, stalled in Congress, is a good initiative, but it is necessary to go further. He suggests increasing taxation on inheritance in Brazil (in France, the rate can reach 60%) and progressive taxation of the capital stock, which could include a tax on wealth.
He says that Bolsa Família, a positive initiative that helped to reduce part of the inequalities, ended up being paid, in part, by the middle class and popular classes. This is because the cash transfer program was not accompanied by a fiscal reform that would increase the contribution of the economic elite according to their capabilities.
The country, he says, ends up being “an unfortunate example of the adoption of an income redistribution program without structurally modifying, at the same time, who will pay the tax” that finances the measure, he emphasizes. The same happens now in relation to the new Auxílio Brasil.
Global Study Data
In Argentina, which has been facing serious economic crises, inequalities are slightly below the average in Latin America, although they remain high, the study highlights. The richest 10% in the country earn almost 43% of the national income and own 58.2% of the fortune (in Brazil this number is 79.8%).
The regions with the greatest social inequalities in the world are Africa and the Middle East. In Europe, the income of the richest 10% represents around 36%% of the total, while in the Middle East and North Africa it reaches 58%, a figure similar to that of Brazil.
The richest 10% in the world earn 52% of the world’s income, while the poorest 50% receive only 8.5% of the total. The differences are even greater in terms of wealth: the poorest half own only 2% of the world’s wealth (in Brazil it is less than 1%), while the wealthiest 10% own 76% of the global wealth.
Since 1995, the richest 1% in the world has taken 38% of the increase in global wealth, while the poorest 50% have been left with only 2% of the additional wealth accumulated in the world during that period.
The Covid-19 pandemic has exacerbated the disparities. Last year marked the biggest increase in the billionaires’ fortune, which grew by $3.7 trillion, the equivalent of healthcare budgets worldwide, according to the report.
The study asserts that after three decades of commercial and financial globalization, global inequalities remain extremely significant. In 2021, they are at the same level as they were in the beginning of the 20th century, the time of the so-called modern western imperialism, with colonies and territories that created economic disparities between countries. Furthermore, the income of the poorest 50% in the world today is half of what it was in 1820.
The report also takes into account gender-related income inequality. In the world, women earn, in general, a third of men. Brazil has a performance equal to the average of rich countries in Europe: the salaries of the Brazilian female population represent 38% of the country’s total income.
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