Thursday, June 23, 2011

Inequality in DC and Brazil

The week before last, I was in Brazil, a country long known for its extraordinarily high levels of inequality. Recently, however, Brazil has a new identity, as a country that has significantly reduced inequality. According to the World Bank, Brazil has reduced its poverty (from 20% of the population in 2004 to 7% in 2009) and its extreme poverty (from 10% in 2004 to 4% in 2009). Furthermore, according to the same report, the incomes of the poor are increasing faster than the incomes of the wealthy:
Between 2001 and 2009, the income growth rate of the poorest ten percent of the population was 7 percent per year, while that of the richest ten percent was 1.7 percent.
Now, of course, the levels of poverty are quite different in Brazil and DC, but a recent Post article demonstrated that we are seeing opposite trends in the US, where "With executive pay, rich pull away from rest of America." A comparison with DC is thus interesting because, as Brazil reduces inequality, "weathered the global financial downturn with relatively minor impacts," and was one of the first countries "to resume growth in 2009," US and DC's inequality increased through the 1990s and has remained stable.

The standard measure of inequality is the Gini coefficient, which ranges from 0 (lowest level of inequality) to 1 (highest level). If everyone was poor or if everyone was rich, then the Gini coefficient would be 0, reflecting no inequality. If one person had all the income and everyone else had nothing, then the Gini coefficient be 1, reflecting extreme inequality. According to the UN, Gini values above 0.52 ranks as “very high.”


1960
1979
1989
1999
2004
2006
2009
DC Gini Index

.450
.492
.549

.537
.532
Brazil Gini Index
.500

.63
[.61].56

.55

This table shows the downward trend in Brazil starting after 1989. In contrast, DC's Gini coefficient increased in the 1990s and then basically maintained that level since then. Brazil has consciously implemented policies to increase the incomes of the poor, which have brought down the Gini coefficient. Now, Brazil and DC have very similar levels of inequality.

However, the Gini index is a problematic measure because the slight decline in the DC Gini index could be due to many of the poor leaving DC or due to other shifts in middle income households or due to a variety of trends.
In general, though, the Gini coefficient does show a highly unequal society, which has significant consequences, a topic for a future post.

Interestingly, Puerto Rico and DC have, in fact, long shared very similar levels of inequality:



1960
1979
1989
1999
2004
2006
2009
DC Gini Index

.450
.492
.549

.537
.532
Puerto Rico Gini Index



.558

.535
.532
Brazil Gini Index
.500

.63
[.61]
.56

.54

DC and Puerto Rico also share their lack of representation in Congress. In 1989, when Brazil had reached its highest Gini coefficient level, the Brazilian people freely elected their first president after decades of military dictatorship. After 1989, Brazil's Gini coefficient declined significantly through the reduction of poverty. Could lack of democratic representation have an impact on inequality?

P.S. UN Habitat has highlighted DC as a particularly unequal city in contrast to more equal cities, such as Caracas, Amman, and Beijing.

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