Monday, October 22, 2018

Piketty on Brazil

Thomas Piketty has a blog post on Brazil, arguing that the country was just starting to address major inequalities, all of which is now in jeopardy. He looks especially at suffrage as critical for changing Brazil's political dynamics, where people with less formal education and with darker skins gained more influence. However, he argues that bolder reform are needed to really tackle inequality (including in the United States).

When in power the PT put in a credible performance. Thanks to the rise in minimum wage and the new system of family allowances (Bolsa Familia), economic growth was accompanied by an unexpected fall in poverty. The PT also set up schemes for preferential access to the universities for the working classes and the black and mixed populations. But for lack of reform in the electoral system, the PT never succeeded in attacking the structural fiscal backwardness of the country (indirect taxes rise to 30% on electricity bills, whereas top inherited wealth is taxed at 4%). The result is that the reduction in inequality has been made at the expense of the middle classes and not the richest categories (see this research by Marc Morgan on the evolution of inequalities in Brasil, from which the figures reproduced on this post are extracted).
When the progressive forces have succeeded in reducing inequalities in the 20thcentury, it is because they fought for an ambitious, egalitarian agenda based on political reforms while at the same time implementing fiscal and social reforms. In the United States the 1913 constitution had to be amended to create a federal income and inheritance tax, which became the most progressive of its kind in history and enabled the financing of the New Deal. In the United Kingdom, the veto of the House of Lords had to be ended, and in France that of the Senate, failing which the social reforms in 1945 would never have seen the light of day. Today, the progressive forces refuse any sort of ambitious discussion on the democratisation of American, European or Brazilian institutions. However, it is not by leaving the monopoly of breaking with the past to the nativists or the reactionaries that equality and democracy will be saved.
He does not specify what reforms he has in mind, though his book seemed to focus a good amount on taxation. He also does not discuss how to do it politically. A major problem in Brazil is perception of corruption--politicians asking for more money is much less feasible as a result. But his overall point is interesting, in that the lack of structural reforms mean that the middle class, not the rich, are bearing the brunt of the reduction of inequality, and that creates even more political problems.


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