Home Brazil “Inequality in Brazil is a political choice,” says an Irish economist

“Inequality in Brazil is a political choice,” says an Irish economist

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In an interview with the Folha newspaper last week, Irish economist Marc Morgan Milá, 26, says the containment of President Michel Temer’s government spending will particularly affect the poorest.

The new conclusions of the economist are provoking a debate about the reality of the last 15 years: the inequality in Brazil did not fall as previously thought.

For him, the successive Brazilian rulers chose not to face the problem, avoiding policies that could limit the income of the top of the pyramid, as a fairer tax system.

“The recent history of Brazil leads us to say that there have a political choice for inequality.” said he.

Milá is in Brazil, where he participates in studies with economists from the Institute of Applied Economic Research (Ipea). The group intends to launch, this year, a series about Brazilian inequality that began in 1926.

The economist says that a more detailed analysis shows that between 2001 and 2015 inequality “did not fall as much as one imagined. My study shows that the decline in inequality is much lower.”

The richest 1% group has about 1.4 million people, with annual income of R $ 287 thousand. The richest 0.1% brings together 140 thousand people with a minimum income of R $ 1.4 million. Meanwhile, the average annual income of the entire population is R $ 35 thousand. It is a very big discrepancy. This is the important point in the Brazilian case: the concentration of wealth is very high, says Milá.

According the economist, recent history indicates that there was a political choice for inequality and two factors illustrate this: the absence of an agrarian reform and a system that taxes the poor. For us, foreigners, it is impressive that the tax rates on inheritance are 2 % 4%, in other countries it reaches 30%, wealth taxation stands at around 5%, while the poorest pay at least 30% of their income through indirect taxes on light and food.

“…The freezing of public spending for twenty years can have a negative impact on inequality because the poorest people are dependent on these expenditures…”

“…Land legislation and fiscal policy, either in the creation of more just taxation or in the withdrawal of renunciations that benefit the richest, are also weighing the bill…”

But the poor are still very poor and the income gap between the two extremes is very high. By excluding the richest 20 per cent, the income of the remaining 80 per cent in Brazil is equivalent to that of the poorest 20 per cent in France. The inequality is similar to that of France at the end of the 19th century, say Milá.