For Richer… or Poorer? The Capture of Growth and Politics in Emerging Economies

The emerging economies Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey – in short, the BRICSAMIT – have come to be considered the economic powerhouses of recent decades, fostering a narrative of the growth of the South. Not only have these countries managed to reduce poverty; most have embarked on a steep economic growth path and play an increasingly influential role on the global scene. But an emphasis on growth masks another, worrying trend. Today, all eight BRICSAMIT countries occupy the top ranks as some of the most unequal countries in the world. The price these countries – and millions of their citizens – pay for this is high.

Excessive inequality hampers development prospects: negatively impacting growth potential, threatening poverty reduction, leading to mass migration flows and ‘brain drain’, and reducing opportunities for young people. Inequality affects all aspects of a person’s life and life chances, from health and education to living environment and prospects for old age. Extreme inequality perpetuates high levels of violence and crime, fuels mistrust and undermines social cohesion.

It is now clear that the gains of economic growth in the BRICSAMIT have been captured by the very richest. Fortunes have been made by large corporations engaged primarily in the extractives, agribusiness, infrastructure, media and telecommunications sectors. The capture of power by economic elites, including companies, drives inequality by ensuring the rules remain rigged in favour of the rich, who grow increasingly
influential.

This concentration of wealth and power in the hands of the few is clearly at the expense of the many. It reinforces existing social structures, perpetuating inequality and excluding millions of people from an equitable share in prosperity. Despite the growth in these next-generation economic miracles, more than 2.3 billion people in the BRICSAMIT are still living on less than $5 a day. Civil society organizations have long understood that inequality is a barrier to development. This is at last becoming more widely recognized, as the long-held theory of the ‘trickle down’ of wealth as countries grow richer fails to become a reality. Yet measures to tackle extreme inequality are not high on the political
agenda in most emerging economies; or are effectively blocked by an alliance of the economic and political elites who have little interest in changing the status quo.

This summary paper – which draws from a forthcoming research report commissioned by civil society networks across the BRICSAMIT countries – aims to increase the urgency to tackle the structural causes of inequality, by shedding light on the nature and scope of the issue in the BRICSAMIT, and the economic, political and social consequences these countries are now facing as a result. It looks at the conditions that enabled the rise of the super-rich and how political and media capture by this elite is undermining democracy and undermining most attempts to reduce inequality. The paper concludes with recommendations of ways in which growth and development could be used to make our societies more equal.

Whilst we welcome the sustainable development goal related to reducing inequality, we urge governments and leaders to recognize that reducing inequality is a deeply political undertaking by which the vested interests of the existing elites will need to be challenged. If developmental goals – such as equal rights for all and an end to poverty and gender discrimination – are to be achieved, the debate must shift away from growth at all costs to focus on achieving greater equality.

For the full summary paper, please download: ForRicherOrPoorerFINALdigital

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