The reduction of social inequality in PT governments

Carlos Zilio, ZE, 1970, felt-tip pen on paper, 47x32,5
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By VALERIO ARCARY*

The PT project of reforms, for the regulation of peripheral capitalism, without challenging the dominance of imperialism, and without ruptures with the Brazilian bourgeoisie, did not pass the test in the laboratory of history

Data on the evolution of social inequality in Brazil in the XNUMXst century are subject to a controversy of interpretation. This controversy rests on different interpretations of the impact of public policies during the three and a half years of the coalition governments led by the PT.

There is no doubt that between 2004 and 2014, therefore, for ten years, a slow but consistent trend of poverty reduction prevailed, associated with another, less vigorous trend of reduction of social inequality, especially among wage earners.

However, paradoxically, Dilma Rousseff's second term was interrupted by an institutional coup, articulated by Eduardo Cunha, president of the Chamber of Deputies, in association with Vice President Michel Temer, also from the MDB, sanctioned by the majority of the National Congress, and the legitimization of the STF, and supported by mass mobilizations, especially of the middle classes, on a scale of millions. The argument that Dilma Rousseff's government was overthrown because the reactionary offensive was stronger is circular. This is equivalent to saying that the PT lost its conditions to defend its government because the bourgeoisie won.

The unanswered question is how to explain why a mobilization against the coup was not possible, supported by the popular classes, at a higher level than the demonstrations of the “amarelinhos”? There are two hypotheses that are not entirely exclusive. There wasn't because the PT leadership lacked political will to fight, or there wasn't because, unlike Venezuela, it wasn't possible.

The hypothesis of this text is that, fundamentally, there was no willingness to fight in the organized sectors of the working class. It wasn't possible. However, it remains to be seen the reasons for this popular perplexity. The turn of Dilma Rousseff's second term in the direction of a severe fiscal adjustment led by Joaquim Levy certainly weighed, which left the social base disconcerted that guaranteed the 2014 electoral victory, which had already been tight and difficult, even in the great proletarian centers. It turns out that a political shift of this complexity cannot be reduced to a single factor.

Thirteen years is not thirteen months. Therefore, the problems predate the appointment of Joaquim Levy. Considered by the Gini index, social inequality remained dramatically high, higher than in neighboring countries such as Argentina[I], during the thirteen years of PT-led governments, as can be seen below in this graph:

This downward curve in Gini indices in Brazil is not conclusive. There is a controversy. To what extent has social inequality decreased? The available data are controversial. The databases are not very congruent. In other words, the data from the Federal Revenue database, and those collected by the PNAD and the POF of the IBGE, and by the RAIS (Annual List of Social Information) of the Ministry of Labor are not compatible and are not consistent with each other, the which has already been admitted even in official documents of the federal government, including during the PT-led administrations[ii].

The analysis of inequality based on tax returns leads to the conclusion of a much greater concentration of income than in studies based on household surveys, such as the IBGE's PNAD, which nullifies, at least partially, the optimistic conclusions about the index from Gini.

Here is the most up-to-date data from the Personal Distribution of Income and Wealth Report, which refer to the income tax returns filed in 2015, relative to 2014, even so, probably underestimated by tax evasion[iii]. It presents the concentration of income and wealth in more detail: the richest 5% hold 28% of total income and wealth, with the richest 1% accumulating 14% of income and 15% of wealth. The richest 0,1% hold 6% of declared wealth and total income. The importance of this information cannot be underestimated.

In 2015, the universe of declarants was 26,7 million. This means that 0,1% of this population, which corresponds to 26,7 thousand people, accumulate 6% of all income and wealth declared in the IRPF in Brazil. It can thus be seen that the richest 0,1% appropriated 44,3% of the gross income of the richest 1%, and 21,5% of the richest 5%.

This means that the richest 0,1% have almost half the income of the richest 5%, or that the richest 26,7 thousand have almost half the income of the 1,3 million declarers who have the highest income. In turn, the declaring population, belonging to the richest 1%, owns 52,7% of the total wealth of the richest 5%, while the ratio between 0,1% and 5% is 23,2% of goods and rights liquids.

This means that, in 2014, something like 26,7 thousand Brazilians, belonging to the richest thousandth of the distribution, own more than half of the total wealth declared by the 1,3 million richest people (equivalent to the richest 5%): a very high concentration of wealth in the “hard core” of the bourgeoisie. Considering this context, it is most likely that the inequality coefficient (Gini) would have remained practically stable, while according to the PNAD the rate would have fallen by 3%. [iv].

The reduction in social inequality that occurred, and it was not great, was essentially restricted to salaried workers. The tendency of this slow process is not, however, recent. For more than twenty years there has been an increase in the minimum wage for manual labor (or blue collar), pressured by various factors, including the recovery of the minimum wage with readjustments above inflation.

This trend has been interrupted in the last six years, since 2014, due to the most serious recession since at least the beginning of the eighties. It was accompanied by a drop in the minimum wage of employees in routine (or white-collar) functions and, more sharply, by a drop in the average salary of employees with a higher education degree.

It is confirmed, therefore, that the personal income inequality, an indicator that considers only the disparities that occur between those who live off wages. Another important indicator to be considered is the evolution of functional distribution of income.

This is a variable calculated from the disaggregation of GDP (Gross Domestic Product) values. It measures the relative share of labor and capital in national income.[v]

It reveals a recovery until 2010, but only to return to 1990 levels.

It is very likely, however, that, in the last six years, the impact of the recession, with an increase in the unemployment rate to above 10%, and the fall in the average salary, the proportion of wages over GDP has retreated.

In other words, when the recovery cycle of economic activity occurred between 2004/2013, with the fall in 2009, the pressure of demand pushed up the average salary of occupations with less qualification. This process was only possible while the international economic situation, driven by demand from China, benefited growth in Brazil with the appreciation of commodities, reversing, favorably, the terms of trade conditions, which before the last decade had only happened when two world wars, guaranteeing the accumulation of reserves and controlling inflation.

The graph above confirms a strong correlation between economic growth in Brazil and in the world. Globalization, that is, the greater internationalization of capital, favored a relative synchronization of the pace of economic cycles. Relative because, as of 2014, commodity exporting countries slowed down or stagnated. Brazil, on the other hand, plunged into a vertiginous recession, with an abysmal decline in GDP above 7% between 2014 and 2017.

This is the biggest recession since, at least, the beginning of the XNUMXs, when the entire periphery of the system was hit, hard, by the increase in the basic interest rate of the Central Bank of the USA, after Reagan took office and, as a result, , due to the impossibility of rolling over interest on foreign debts. With this inversion of the international scenario, the gains in reducing personal and functional income inequality are threatened.

It was in the context of previous growth, with the drop in unemployment rates, the increase in the minimum wage, and the expansion of public income transfer policies, such as Bolsa-Família, that a small reduction in personal income inequality was possible until 2013, while the economy was still growing. Since then, this dynamic has been reversed, due to the stagnation of 2014, and the deep recession in 2014/16.

When other variables are compared, comparatively, with the share of wages in national income, such as the evolution of the GDP, the unemployment rate, the evolution of the average wage, or productivity gains, the fragility of the results becomes even clearer.

The true argument that wage gaps between those who live from work have narrowed is insufficient to prove the thesis of greater social mobility. It is simply obtuse to try to demonstrate that Brazil has become less unfair, while all indicators show that the rich have become richer.

Processes similar to those of the last decade of increased consumption, with changes in the household diet and greater access to white line electronics products, have already happened in the past, for example, during the so-called Brazilian miracle of the early seventies, or during the initial cross plan, in 1986. The first was encouraged by economic growth, and the second by household indebtedness.

Available data on personal and functional income distribution are not sufficient to conclude anything meaningful about social mobility. Economists and sociologists consider two rates of social mobility, absolute and relative. The absolute rate compares the occupation of the father and son, and the first activity of each with the last job of each.

The relative mobility rate indicates the level of unequal access to better paid positions in the labor market, which is strongly correlated with levels of education. In Brazil, the absolute mobility rate was high until 1980, but the relative rate has always been low, almost stationary.

The very low relative mobility rate is one of the legacies of a society that was built on slavery, in which the possibility of access to quality fundamental education was restricted to the children of those who could afford the costs of private education: the bourgeoisie and the middle class. Extraordinarily, only exceptional students from public schools manage to gain access to public higher education.

In short: in one or two generations, many millions of Brazilians, children of migrant parents who worked in agriculture, found jobs in industry and services in large cities and, therefore, rose socially. The heredity of occupations is no longer a pattern, as it was in pre-industrial Brazil, when the children of farmers were preparing to become farmers.

In other words, we know intense absolute social mobility due to urbanization, but this has not made Brazil a less unfair country. Accelerated economic growth between 1950 and 1980, when the country was doubling GDP every decade, reduced poverty but did not reduce inequality.

What explains this process is that social mobility trajectories benefited millions of people, but very few rose significantly. People rose in the socioeconomic hierarchy, but they generally rose to the next higher rung than their parents occupied.[vi].

It is true that Brazil has undergone transformations in the last thirty-five years, which correspond to the period of the democratic-electoral regime, after the fall of the dictatorship. Some changes were progressive, such as, for example, the reduction to half of Brazilians who were in a state of indigence, or the doubling of the rate of young people enrolled in secondary education.

But others were very regressive, such as the privatization and de-industrialization of the economy. It is premature, at the very least, to discern which were the most conjunctural and the most structural. Some, such as the reduction in the female fertility rate or the increase in life expectancy (reaching 75 years in 2014), seem consolidated[vii].

Others, such as reducing the proportion of informal work on the set of economically active workers, or increasing the consumption of proteins in the popular diet, do not. The increase in consumption of durable goods rested on two conjunctural processes: the reduction in unemployment, between 2004 and 2013, and the increase in access to credit, especially in Lula's second term. Both were spectacular, but must be considered circumstantial, that is, they were reversed, quickly, in the new situation opened by the bourgeois offensive that culminated in the impeachment. They are not appropriate indicators to support that social inequality has been reduced.

The fundamental conclusion that results from this analysis is that the PT project of reforms, for the regulation of peripheral capitalism, without challenging the dominance of imperialism, and without ruptures with the Brazilian bourgeoisie, did not pass the test in the laboratory of history. Progressive reforms were few and ephemeral.

The reformist strategy, involuntarily, paved the way for the overthrow of Dilma Rousseff's government, which remained suspended in the air. A historic opportunity was missed.

*Valerio Arcary is a retired professor at IFSP. Author, among other books, of Revolution meets history (Shaman).

Notes:


[I] The Gini Index, created by the Italian mathematician Conrado Gini, is an instrument to measure the degree of income concentration. He points out the difference between the incomes of the poorest and the richest. Numerically, it ranges from zero to one (some have zero to one hundred). The value zero represents the situation of equality, that is, everyone has the same income. The value one (or one hundred) is at the opposite extreme, that is, one person owns all the wealth. In practice, the Gini Index usually compares the poorest 20% with the richest 20%. 

[ii] In order to better understand the structure of income and wealth distribution in Brazil, it is necessary to complement the analysis of PNAD and POF data with a study of income and wealth distribution based on fiscal data, that is, based on IRPF data. . The legal obstacle comes from the interpretation that any more disaggregated disclosure of IRPF data would imply a breach of tax secrecy. PNAD income data are basically concentrated on labor income, with little information on capital income or the wealth of Brazilian families. In parallel to the PNAD, the IBGE also conducts the National Family Budget Survey (POF), in which data are collected on the sources and uses of resources by Brazilian families. POF data on sources of income are classified by income group, in terms of the minimum wage, and constitute an approximation of the income composition of Brazilian families.  Look here. Consultation on 15/01/2017.

[iii] This study released by the Ministry of Finance admits the incongruity of data and the underestimation of inequality when considering only the PNAD information. Report on the Personal Distribution of Income and Wealth of the Brazilian Population. IRPF data 2015/2014. Look here. Consultation on 10/01/2017.

[iv] A reference for this analysis was the study by Marcelo Medeiros, Pedro Souza and Fábio Castro, UNB researchers, who had access, for the first time, to Federal Revenue data. The PNAD is based on questionnaires applied to selected households and includes, for example, informal workers, which the IRPF income tax does not do. On the other hand, in the PNAD, those with more assets and income can only inform their main source of income. The data of the richest reported in the PNAD are underestimated. Look here. Consultation on 15/01/2017.

[v] The functional distribution of income refers to the division of income generated in the production process by the factors used in production. The functional term in the expression indicates that the distribution of income is carried out taking into account the function performed by capital and labor. This defines the shares of income from work and capital in the income generated by the economy. Look here. Consultation on 15/10/2015. 

[vi] Social mobility is a variable still immersed in serious methodological controversies. It tries to gauge the greater or lesser intensity of the process of social ascension in each historical period. There are several theoretical models to measure social mobility. The first problem is a correct identification of social classes. One option is the choice of “groups of status” ordered hierarchically, according to income and education characteristics. Social mobility in Brazil by José Pastore and Nelson do Valle Silva, São Paulo, Macron Books, 2000, for example, embraces this hierarchical classification of estates. The authors describe social stratification based on only two variables, a simple model. This choice is, of course, arbitrary. It is common to find studies that subdivide society into five or six categories: (1) low-inferior; (2) low-upper; (3) lower-middle; (4) medium-medium; (5) medium-upper and (6) high. The model can also cross these data with those of gender, age and geographic distribution, as is common with voting intention surveys. Social mobility in Brazil: patterns and trends by Maria Celi Scalon, Rio de Janeiro, Revan, 1999, proposes another, more complex, way of studying social mobility. Social classes are presented as: (1) Professionals; (2) Administrators and managers; (3) Owner-employers (urban); (4) Routine non-manual (generally office, sales, and trade personnel); (5) Self-employed (small proprietors without employees); (6) Qualified manual; (7) Unqualified manual; (8) Rural employers; (9) Rural employees (workers). This topic can be researched on the website of the Brazilian Journal of Social Sciences: Look here. Consultation on 20/03/2010.

[vii] IBGE statistical series on variations in fertility rate and life expectancy are available at:  Look here.

Consultation on 16/01/2017

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