Analysis Of The Growth Of Emerging Economy And The Income Distribution Of Habitants-Taking BRICS As Example

Abstract: The last decade has presented a new global economic scenario lead by emerging markets. BRICS countries (comprised by Brazil, Russia, India, China and South Africa) have been at the forefront in this phenomenon. During these years, the real Gross Domestic Product (GDP) growth of the world (annual percent change - A% c) averages 3,83. It is worth mentioning that the above referenced countries reached 6,01 (157,02% more); and Advanced Economies - not yet recovered since the last financial crisis - reached 1,6 (47,78%). Meanwhile, different measuring models have found that in the world, just the top 20% of the population controls over 70% of the global revenue. These economies have been growing as well. The question is: Are they reversing this lack of equality trend? This paper offers an analysis of these points and studies the importance of adding equity in the development agenda as a strategy for sustainability and continuous growth.

Key words: BRICS countries growth; National income distribution; Equity in the development agenda.

1 Introduction

BRICS Countries are leading the growth of the economy in the world, and have done so for over 10 years. The International Monetary Fund (IMF) projected that from 2013 to 2017 it will maintain its growth at least 26% above World Growth GDP. Note: GDP, will be the measure utilized in this paper when referring to growing economies. This information comes from the IMF data base and calculations made by the author.

Income distribution refers to how a nation’s total GDP is distributed among its population (Sullivan and Sheffrin, 2003). This distribution is typically unequal, and becomes an issue which has been avoided for many years. In 2004, this trend changed when the International Labor Organization (ILO) published: "A Fair Globalization.” After this occurred, other major development-related institutions followed suit and began posting about inequality as well. Currently, there is a unanimous concern in international institutions about that issue and it has become clear that the issue of inequality must be incorporated in discussions about development.

This paper analyzes: (i) Distribution of income or consumption per country, (ii) Gini Index and, (iii) Understanding the background of these countries, this research also incorporates information regarding poverty per country. All the data comes from the World Bank and the calculations made by the author. This paper also discusses the negative consequences of rising inequality and defines the importance of adding equity in the development agenda, as a strategy for sustainability and long-term growth.

2 Growth in BRICS Countries

The Figure 1, shows the argument that as introduces the research and salient facts may be mentioned; (i) 2003 and 2004, emerging economies (BRICS) began a significant consolidated period of growth (and were already doing so), during these two years, their GDP increased from 5,64 to 7,04 (ii) 2008 (September), the outbreak of the global crisis obviously affects everyone. BRICS fell in 2009 to 1,1 (fall but remain in positive), the world economy: -0,6 and Developing Economies: -3,5 (iii) After the global crisis, very slow recovery in developed economies and promising trend showing the BRICS economies.

This graph (figure 1), also evidenced the situation and positioning: BRICS, Advanced Economies and World, from 1991 (since all these countries have data) to 2017, from 2013 to 2017 are projections.

Figure 1 Real GDP Growth (Annual percent change) 1991 to 2017

Considering information about the last 10 years (2003- 2012), the position and growth average for each BRICS country (including the world as well) is: China: 10,45%, India: 7,76%, Russia: 4,73%, world: 3,83%, Brazil: 3,67% and South Africa: 3,46%. All of them have correlated well with the “world” result, except China, with a strong first place position, followed by India (See Figure 2).

Figure 2 Real GDP Growth BRICS Countries (Annual percent change) 2003- 2012

However, fast growth in economies with a background of instability might not be sustainable. From a statistical point of view, when deciding whether measurements agree with a theoretical prediction, the standard deviation of those measurements is of crucial importance: if the mean of the measurements is too far away from the prediction, then the theory being tested probably needs to be revised. (DeVore, 2005). The following comparison was also done for these economies. (See Figure 3):

Figure 3 Market Instability (Mean Vs. Standard Deviation) 2003- 2012

From these results it can be determined which country seems to have higher or lower levels of uncertainty. From higher to lower, the order is the following China and India (far away from the rest), then, South Africa, Brazil, and Russia. Almost the same positioning reached in its growth.

The new global economic scenario has changed phenomenally in the last decades. Securing a sustained growth in the coming years will be crucial in reducing the level of uncertainty for these countries; therefore, it becomes necessary to implement adequate strategies.

3 National Income Distribution

How is income distributed worldwide? (Ortiz and Cummins, 2011). We inhabit a planet in which the top 20% of the population controls over 70% of global revenue. What about BRICS countries?

The following is an analysis for each country: (i) distribution of income, reflected in the percentage of shares of income or consumption accruing to portions of the population and ranked by levels (deciles in this paper): highest (more income); lowest (less or no income). (ii) The Gini Index-Lorenz Curve, which represents the distribution of income within a community, plotted with a Lorenz curve, where “0” means perfect equality, and “100” implies perfect inequality (World Bank, 2013). (iii) Poverty; considering the percentage of the population living on less than $2,00 (which covers the $1,25 a day at 2005 international prices).

The figure 4 make more completed the analysis, showing graphically the main variables per country during: 1994 -2002, 2003 – 2012 (last decade), and the average. Also, as a visual reminder contrasted with its GDP growth average analyzed before (2003-2012). The data includes all available years, from 1994 to the last available year (each country has different years of information availability).

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