Beyond market incorporation: challenges ahead

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Albert McDonald
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University NYC 2015 Beyond market incorporation: challenges

1 INOVANDO NO SETOR PÚBLICO BRASILEIRO Desafios Ins*tucionais e Polí*cas Públicas INNOVATION FOR INCLUSIVE GROWTH Columbia University NYC 2015 Beyond market incorporation: challenges ahead Lena LAVINAS Ins$tute of Economics Federal University of Rio de Janeiro

2 An innovative and remarkable pattern of inclusion, but mostly through market incorporation MARKET INCORPORATION refers to people s par$cipa$on in market socie$es through the crea$on of private and public jobs. Well- being is guaranteed through labor income. SOCIAL INCLUSION means that, irrespec$ve of household income, people should benefit from aggregate well- being in the society. If social inclusion holds, spending prizes not only income security but above all the promo$on of equity and convergence, equalizing opportuni$es through public provision.

3 CASH PREVAILS OVER THE PROVISION OF PUBLIC GOODS AND SERVICES, ENHANCING COMMODIFICATION 16% Brazil - Federal Social Spending (as % of GDP) 14% 12% 10% 8% 6% Cash Transfers In Kind Total 4% 2% 0% Source: SIAFI - STN. (Expenditures by the Central Governement) and IBGE (SGS/BACEN).

4 Brazil, access to adequate sanitation*, cell phones, color TV sets per income decile (% households) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 decile 2 decile 5 decile 6 decile 9 decile 10 decile Sanitation (2003) Sanitation (2013) Cell Phone (2003) Cell Phone (2013) TV (2003) TV (2013) Source: PNAD 2003 e *Running Water + Sewage + Adequate garbage collection

600 Brazil, Index of Growth - Total Wages, Total Credit, Personal Credit, Consumer Credit Constant Reais as of December 2014 (2002=100) 500 R$ 1,5 tn 400 R$ 834 bn Total Wages Consumer Credit 300 R$

5 600 Brazil, Index of Growth - Total Wages, Total Credit, Personal Credit, Consumer Credit Constant Reais as of December 2014 (2002=100) 500 R$ 1,5 tn 400 R$ 834 bn Total Wages Consumer Credit 300 R$ 3 bn Personal Credit (Household) Total Credit Consumer Credit 200 R$ 309 bn R$ 203 bn R$ 2,3 tn Personal Credit (Household) R$ 861 bn 100 R$ 1,3 tn Source: IBGE (National Accounts) and Brazilian Central Bank - Own Elaboration. Adjusted for Inflation by IPCA December 2014

Financial inclusion to boost mass consump$on Brazil, Total Household Debt with and without mortgage (% of Disposable Income) Borrowers Household Debt by Income Bracket in 2014 80% 70% 73% 69% 65% 64%

6 Financial inclusion to boost mass consump$on Brazil, Total Household Debt with and without mortgage (% of Disposable Income) Borrowers Household Debt by Income Bracket in % 70% 73% 69% 65% 64% 46% 60% 50% 54% 40% 21% 18% 28% 30% 20% 10% % 0-3 MW 3-5 MW 5-10 MW > 10 MW Average Total Household Debt (including mortgage) Household Debt (except mortgage) Source: Central Bank of Brasil, Income Brackets by MinimumWages (MW)

7 Access to Public and Private Schools for Pupils and Students Ages 5-17 by Tenths of the Distribution Elementary and Middle School ( ) 100% 90% 80% 70% 60% 50% 40% 30% 20% Public Schools (2003) Private Schools (2003) Public School (2013) Private School (2013) 10% 0% Source: PNAD (IBGE).

Access to college or university - Students ages 18-25 by tenths of

80% 70% 60% 50% 40% 30% 20% Public (2003) Private (2003) Public

8 Access to college or university - Students ages by tenths of the distribution Public x Private Institutions ( ) 100% 90% 80% 70% 60% 50% 40% 30% 20% Public (2003) Private (2003) Public (2013) Private (2013) 10% 0% Source: PNAD (IBGE).

9 Some data on vital inequality (2013): v Prevalence of tuberculosis (per popula$on): 57 [27-99] (5-3) v Maternal mortality ra$o (per live births): 69 deaths (3) v Healthcare spending as a % of GDP: 9,67%, but 5,01% private and 4,66% public v Out- of- pocket expenditure as a percentage of private expenditure on health: 57,8% v Private prepaid plans as a percentage of private expenditure on health: 40,4% v Intensive Care Beds: v Private 36,5% 49,4% v SUS 63,5% 50,6% Source: WHO and CNES - Ministério da Saúde

10 A commitment to equalization? (Therborn 2013) Then, we need a comprehensive tax reform Tax bracket Brazil, Tax Credit per Tax Bracket With healthcare[1] With education With dependents R$ million % R$ million % R$ million 0,0% ,5% ,0% ,5% ,5% Total Fonte: RFB (2014) e DIPAG-RFB. %

11 Challenges ahead: from innovative commodigication schemes towards equalization mechanisms To bet on integra$ve dynamics: uniform, shared and universal public provision To relaunch public investments and increase social spending in the provision of public services and goods in order to create a converging standard of well- being that is shared among all. Promote comprehensive tax reform towards a more progressive system in order to finance social investment (healthcare, educa$on, sanita$on, housing, care, daycare).

If public goods public services, public spaces, public facilices are devalued, diminished in the eyes of ciczens and replaced by private services available against cash, then we lose the sense that

12 If public goods public services, public spaces, public facilices are devalued, diminished in the eyes of ciczens and replaced by private services available against cash, then we lose the sense that common interests and common needs ought to trump private preferences and individual advantage. And once we cease to value the public over the private, surely we shall come in Cme to have diﬃculty seeing just why we should value law (the public good par excellence) over force. Tony Judt, Ill Fares the Land, Thanks for having me

Reducing Inequality and The Brazilian Social Protection System. South-South Learning Forum 2014 Rio de Janeiro, March 17

Reducing Inequality and The Brazilian Social Protection System South-South Learning Forum 2014 Rio de Janeiro, March 17 REAL GDP PER CAPITA* AND GINI INDEX** (*) Values updated by the GDP deflator (2011).