Income gaps in the United States are
approaching Brazilian levels, and that's not good.
A
dozen years ago, Brazil ranked as the world’s most unequal major nation. Brazil’s most affluent 10 percent were
grabbing nearly 50 times more income, on average, than Brazil’s poorest tenth, over
double the U.S. gap.
Amid
this intense inequality, wealthy Brazilians found themselves spending $2
billion a year on private security. Kidnappings in São Paulo, Brazil’s largest
city, became so common that some plastic surgeons started specializing in ear reconstruction. The reason: Kidnappers had taken to
including cut-off ears with the ransom notes they sent their wealthy victims.
Over in Brazil’s second-largest city, Rio de Janeiro, carjackings were taking place so often that police were assuring well-heeled drivers they wouldn’t “be fined for running red lights at night.” Thousands of those drivers took no chances. They armored their cars — or commuted via helicopter from fortified home to fortified office.
Could
inequality this stark ever take root in the United States? Luxury
fortress life, suggests new work
from the Brazil Center at the University of Texas, may actually be closing in
upon us. If current trends continue, Center director Fernando Luiz Lara calculates, the United States will probably “be as unequal as Brazil”
before the end of President Obama’s second term.
Two
trends are driving this “convergence.” The first: Brazil’s most desperately
poor have become less poor. New government social programs have halved the number of Brazilians living in “extreme poverty.”
The
second: U.S. income has become much more concentrated. Since 2009, the top 1
percent of U.S. incomes has jumped an average 11.2 percent while the bottom 99 percent have
slipped 0.4 percent.
Economists
typically measure inequality with a statistic called the “Gini
coefficient.” A nation with all income divided equally would have a Gini of
0.0. The reverse, one person grabbing everything, would leave the Gini at 1.0.
The
world’s most equal nations have Gini ratings that hover around 0.3.
Outrageously unequal nations hover around 0.6. Brazil’s gap has dropped from
that 0.6 to just over 0.5, and the U.S. Gini, just 0.35 in the early 1970s, now
sits at 0.477. The current trajectory, notes Lara, has both nations converging at just under 0.5 by
“2015 at the latest.”
Neither
nation, unfortunately, seems likely to nudge the Gini needle down from there.
They haven’t made much progress shrinking the income share that goes to the
richest of its residents.
Wealth
in both Brazil and the United States remains concentrated at the top. And with
concentrated wealth comes concentrated political power — enough power to derail
policy moves that might roil the rich.
And
what sort of policy moves could confront that concentration? One list has just surfaced in South Africa, the society that may now rate as the world’s most unequal.
In
South Africa, as in the United States and Brazil, elected leaders these
days are talking cutbacks in the public
services that help narrow gaps in income. But COSATU, South Africa’s labor
federation, is pushing back.
COSATU
wants more money invested in jobs, health, and education. And that funding,
says the labor group, should come from higher taxes on the rich. COSATU is urging a new tax
rate on the super-rich and a stiff tax on financial transactions to “encourage
productive investment” and discourage “hot money” speculation.
In
South Africa, top CEOs are taking home 1,728 times the average income of South
African workers. COSATU is also calling for a new tax on firms that continue to
be “stubborn in closing the wage gap.”
Fernando
Luiz Lara from the University of Texas sees one possible plus from the
impending inequality “convergence” between the United States and Brazil.
Americans, he notes, “will probably be quite disturbed (and correctly so) by
becoming as unequal as Brazil.”
This
embarrassment, he suspects, just might “trigger a national conversation” about
how to move toward greater equality. If that conversation takes place, maybe
South Africa’s labor federation should sit at the table.
OtherWords columnist
Sam Pizzigati is an Institute for Policy Studies associate fellow. His latest
book is The Rich Don't Always Win: The Forgotten Triumph over
Plutocracy that Created the American Middle Class.
OtherWords.org
