WHY YOU SHOULD CARE
World leaders fretting over inequality might take a page from Brazil, where the Gini coefficient is down and Rousseff’s popularity up.
Pooja Bhatia is an OZY editor and writer. She has written for The Wall Street Journal, The New York Times and the Economist, and was once the mango-eating champion of Port-au-Prince.
By Pooja Bhatia
What a difference a decade makes, at least in the land of the samba.
The number of Brazilians who’ve made their way out of poverty over the past decade.
It’s also a fifth of the population. The drop in poverty is one reason that Brazil, alone among the BRICS, has registered a decline in economic inequality, with its Gini coefficient, a standard measure of inequality, plummeting by 10 points. And wait, there’s more: This year, President Dilma Rousseff could make good on her 2010 campaign promise to eradicate extreme poverty, which is defined as living on under $1.25 per day.
These shifts are important not just for Brazilians, but for leaders elsewhere newly concerned with inequality. Most observers credit a combination of high minimum wages, public spending and cash transfer programs. The most renowned, Bolsa Familia, provides single mothers stipends for sending their kids to school and to the clinic. Though derided by some as assistencialismo, or welfarism, the transfers aren’t enough to let anyone sit around and do nothing all day.
To be sure, equity hasn’t come free. For starters, GDP growth has been lackluster, with the economy growing about one percentage point in 2012 and, economists expect, less than 2.5 percent in 2013. Inflation has reached nearly 6 percent, deficits are growing, and ratings agencies threaten further downgrades. And while Brazil gorged on easy credit over the past decade, the bills are coming due, and many Brazilians can’t pay them. Such rampant credit expansion is often a prelude to breakdown, warns the IMF.
What’s the point of economic growth if nobody has a job?
Still, some commentators of late have looked at Brazil and wondered, Why all this emphasis on growth, anyway? Sure, you can contrast Brazil’s dismal growth rates with the United States’ robust ones, but Brazil’s unemployment rate is lower, its minimum wage better and, as the seventh-largest economy, it still wields plenty of economic power.
“[T]he Brazil example gives rise to a question we don’t ask enough in this country: What’s the point of economic growth if nobody has a job?” asked New York Times columnist Joe Nocera a couple of weeks ago.
It’s an important question. And at the same time, it’s worth noting that Brazil’s poor are not the only winners here. So is Madame President, who’s up for relection in October. The signs are propitious — Rousseff’s approval ratings reached nearly 60 percent in November — and that’s in part because she’s built a huge constituency of no-longer-poor Brazilians with a deep, visceral appreciation of assistencialismo.