Income Inequality: What Nigeria Can Earn From Brazil

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It was not long ago that American neoconservative Irving Kristol wrote an essay mocking the American Liberals for their obsession with income inequality. His mockery notwithstanding, the reality is that over the last 20 years real income and wealth in the United States have stagnated for the vast majority of Americans, even as they have skyrocketed for those Obama and Liberal Democrats refer to as the top one percent.

In 1915 for instance, the richest one percent of Americans earned roughly 18 percent of all national income. Comparatively in 2011the top one percent of U.S households controlled 40 percent of the nation’s entire wealth. While the U.S case may be extreme, it is far from unique. All over the developing nations of the world and especially in Africa, with Nigeria as a case study, the story is the same, though in varying degrees.

While in the case of the United States, the income disparity in favor of the top one percent can be attributed to personal initiatives, inheritance, entrepreneurship, technological innovation and shifts in the balance of power between elites and the masses. The opposite is the case in Nigeria where wealth accumulation is mostly through graft and corruption. These people contribute nothing to society or to the economic growth of the country.

They are just crooks and parasites who feed on the collective wealth of Nigerians by virtue of their access and proximity to the corridors of power. Today in Nigeria the only economic gains being made go primarily to those at the top of the income distribution, whereas those lower down have seen their real income stagnate or even diminish.

In Nigeria, the politicians and party leadership have and continue to use their privilege to shape policies that further increase the concentration of wealth, often against the wishes and interest of the middle and lower classes. Sometimes, I wonder if the middle class even exist in Nigeria, where you are either too rich or too poor. A sad commentary to say the least. Again in Nigeria, as it is also the case in most developing countries, the advantages tend to be cumulative, with those born into more prosperous families, receiving better nutrition, education, stimulation, healthcare and more social capital for use in later life.

As stated by Prof Ronald Inglehart of the University of Michigan, ”there is an enduring tendency for the rich to get richer and the poor to be left behind and the extent to which this tendency prevails he argued ,depends on a country’s political leaders and political institutions, which in turn tends to reflect the political pressures emerging from mobilized popular forces in the political system at large. The extent to which inequality increases in other words is ultimately a political question and to redress it that of political will.

While in developed countries like the United States where partisan affiliation roughly correlate with social class and where unsurprisingly governments tend to pursue policies that reflect the economic interests of their socio-political constituencies their counter parts in Nigeria do the opposite, which is self- preservation and aggrandizement. In most cases ethnic and religious considerations dictate policy formulation and implementation instead of social class, but even then the ultimate objective is personal wealth acquisition. When one considers the degree of income disparity in Nigeria, one wonders why there has not been a public protest or revolution. The answer, I guess lies in the fact that the Nigerian wealthy political elite have been able to divide the country on ethnic and religious lines. Moslems have been made to see Christians , especially Igbo’s as the enemy.

While the Igbo’s regard the Yoruba’s with distrust and vice –versa, the result has been the inability of these different groups to come together and form a common front in agitating for anything. For the northern elite, there has been a tendency or deliberate policy to limit access to educational opportunities and indeed quality education to their teeming population while their own children are sent abroad to the best schools in the world.

The result is the radicalization of moslem youths by religious indoctrination and subservience to the dictates of the elite who have come to make them believe that the control of power at the center is for their benefit and welfare. In the south west and East, it is a different political tactics. The penchant of its people for personal gratification has been exploited to earn their support and loyalty. The result is that a majority of the Nigerian citizenry are political emasculated to agitate or fight for their rights, let alone the income inequality.

The question therefore is, how can the Nigerian government solve this income gap problem? If there is one country similar to Nigeria interms of its size, socio-economic status, problems and geography, it is Brazil. Brazil is the largest country in latin America with a large population of over 205 million. Like Nigeria , it was ruled for a number of years by military dictatorships, until it embraced electoral democracy in the 1980’s and 90’s.Like Nigeria, Brazil is blessed with a large youthful population and abundant natural resources, but also like Nigeria for a long time did a poor job of spreading its wealth.

The mass of the population remained trapped in rural penury while the fortunate few soared over the country in their helicopters and private jets. At the turn of the millennium, about a third of Brazil’s population languished beneath the international Poverty line (surviving on $2 a day) and about 15 percent was indigent(living in less than $1.25 a day.

Again like Nigeria, corruption was and still is a serious intractable problem. However unlike Nigeria, Brazil has done agreat jobin fighting and reducing corruption, as has most latin American countries. Tolerance of political corruption is now a thing of the past in Brazil. The citizens now judge politicians based on their degree of trustworthiness. When cases of bribery and graft become exposed, prosecutors and courts have issued indictments and the people have taken to the streets in protest.

Its success in its fight against corruption notwithstanding, one area where Brazil has blazed the trail for others to follow is in its fight against income inequality, so much so that in the first decade of the new century, some 40 million Brazilians moved from poverty into the middleclass, with capita household income shooting up by 27 percent. The transformation started with Lula, who on becoming president realized that he could not govern on behalf of just part of Brazil. He needed to ensure that the revolution he had promised during the campaign as a labor leader would benefit everyone.

Soon after his inauguration he picked a well- regarded financial executive to run Brazil’s Central Bank and another sober economist centrist as finance minister. He then hacked away at Brazil’s bloated national budget, cutting spending by $4 billion and imposing a strict budget surplus than the IMF recommended. In 6 months, the value of Brazil’s bonds rose by 20 percent. Using his new political capital and public goodwill, he launched an ambitious new social welfare campaign. Rather than provide the poor with goods and services as most development programs did, he would do something more daring, simply hand out money.

The idea proved controversial first and wrong -headed, but it worked because studies have shown that who best understand what the poor really need than the poor themselves. When given the chance destitute families generally didn’t squander their windfall. Most spent the money quite rationally, especially when the cash went to mothers not fathers.

While there were some income requirements to qualify for this cash assistance, there were also conditions to stay on it, such as ensuring that the children were immunized, went to school and stayed in school. Despite the initial problems of accreditation, enrolment, implementation and monitoring, the program was and still is a huge success. Today in Brazil, more than a decade after its launch, “BolsaFamilia” as it is called has reached about 14 million families, which translates to 55 million Brazilians. The truth is that the Brazilian leader and his advisers realized that it takes only a small sum of money to make a difference in a poor family’s life. The individual payment (which varied according to income and family size) are tiny. The average family gets $65 a month and benefits top out at $200. As a result the amount spent on the program is nothing. It costs Brazilian taxpayers less than half a percent of the country’s $2.3 trillion GDP.

Now when one considers that the majority of Nigerians are poor and living in rural areas without basic social amenities and the inability to feed or send their children to school, one would imagine that a social welfare program as that practiced in Brazil will be welcomed by the people. With a population of close to 200 million people, let us assume that the Nigerian Government allocates one million naira a year under this program to every Nigeria family, minus cost of implementation and monitoring, it will amount to a monthly cash assistance of a little over 83,000 Naira per family beneficiary or more depending on the size of the family.

Considering the fact that not all Nigerians, especially the rich or upper middle class would benefit from this program, it is not difficult to see the impact it would have in closing the income gap considerably. Minus the yearly cost of implementation, this amount is insignificant when compared to the billions spent on projects that never get completed or the billions members of the national Assembly spend on themselves or even that stolen by one government official or civil servant,

Besides the benefit of such a program will be enormous. It will provide a significant boost to the overall economy. By giving the poor money to spend, the program will increase domestic consumption, an important economic driver. There will also be other less tangible and less predictable results such as empowering women, so they don’t have to wait on their husbands for handouts.

It will allow parents to feed their children and save children from begging for food and alms, thereby enabling them to live more autonomous, dignified and productive lives. The women will also feel more empowered when they can own their own bank account and since the money will not be paid through an intermediary but directly into their bank accounts they will owe no favors to any politician or government official, making it impossible for officials to skim off the top.

It will also break the transmission of poverty from one generation to the other. For the state governments who are finding it difficult to get their citizens to immunize or send their children to school, what better incentive can the citizens want? If properly worked out, budgeted and implemented with a dedicated personnel, there is absolutely no reason why the program cannot work in Nigeria even at the state level. It is a program that has generated such world -wide interest that countries like South Africa and Turkey, just to name these two have sent their experts to Brazil to study how it is done.

I must however sound a note of warning. If considered and implemented, it must not be done with the exclusion of other programs such as a workforce Development program, a reinventing of our educational system with emphasis on the training of students with the relevant technological skills for industries of the future, a reorganization and restructuring of our institutions, the establishment of a stable social and political environmentfor economic growth and the adjustment of our monetary policy as it relates to the dollar.

In this regard it is wrong for the Nigerian government to keep acting as if money is wealth and that its control will spur economic activity. The truth is that money is not wealth, rather what it does is to measure the value of products and services, just as scales measure weights, ruler measure length and clocks measure time.. Money is therefore a claim on goods and services. Unstable money as we are presently experiencing in Nigeria hurts investment. After all why take a risk if you do not know the value of the currency in which you are going to be paid back.

In conclusion with regards to the social welfare program to help solve our problem of income equality I will add that to make it work if implemented, accurate data is absolutely essential., hence I agree with the maxim by Arthur Conan Doyle, who Opined, “it is a capital mistake to theorize before one has data. Insensibly, one begins to twist facts to suit theories instead of theories to suit facts.

NnannaIjomahB.Sc MA is a New York based Political Science lecturer and former Special Assistant to the late IkembaNnewi, Chief EmekaOjuwu.

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Articles by Nnanna Ijomah