The nature of transition from apartheid government to a stable democracy in 1994 marked South Africa as one of the few countries that had managed change peacefully. While economic inequalities brought about by apartheid policies had impoverished large sections of the black population in South Africa, the newly democratic country had the benefit of strong institutions, such as an independent judiciary, an efficient civil service, and a modern industry with good infrastructure. However, what it lacked was good local-level ‘micro-institutions’ that could convert political freedom to economic opportunity. While good macroeconomic management stabilized the economy, it was not accompanied by a push for economic and social development in black townships. This failure was partly the consequence of a leadership vacuum that was created in black townships when many of the more capable local workers and activists left the townships to take up jobs in the provincial and national governments (Mangcu, 2012: 482). The focus of the national government was more at the macro-level on the policy of Black Economic Empowerment (BEE) meant to give the black population a share in ownership of firms and employment. This increased the representation of blacks at top levels of enterprises, but, in the absence of significant investments in education, did little to secure stable and well-paying jobs for black workers (Horwitz and Jain, 2011).
Though considered a developed state, Russia inherited an economy from the former Soviet Union that was suffering from problems of underinvestment, inefficiency, and relative backwardness when compared not just with the more advanced Western economies but also with many of the more dynamic East Asian economies (Robinson, 2011: 9). Initial economic policy in the post-Soviet era was based on stabilization of the domestic economy by cutting budget and trade deficits, removing price controls, liberalizing the internal market by throwing it open to foreign competition, and privatizing state-owned enterprises. However, the process was deeply flawed and led to a period of economic crisis and declining economic output that lasted for the rest of the 1990s. The successor state to the USSR, which was the second largest economy in the world when it collapsed in 1991, became the twelfth largest by 1998 (Intriligator, 1998: 242–243). Economic decline was accompanied by a steep decline in living standards and growing criminalization of the economy (Zhuravskaya, 2007).
Persisting Social and Economic Inequalities
Countries that suffer from socio-economic inequalities face two significant challenges. The first is to raise total income levels of the population, and the second to ensure that it is more equitably distributed. The first is achieved by attaining high rates of economic growth and the second by socio-economic interventions, including taxation and welfare spending, that ensures that income is more equitably distributed. The varied paths that the five countries have followed is reflected in any current evaluations of the nature of economic growth and socio-economic outcomes in the five BRICS countries (Ardichvili et al., 2012; Arrighi et al., 2010). India, Brazil, South Africa, and Russia, despite having enjoyed periods of high-economic growth, continue to experience persistent inequality in income distribution. China, which was relatively more successful in achieving both high growth and greater income equality in the early years of its development, has seen inequality rise since the liberalization of the economy in 1978.
The Global Inequality Report which tracks inequality around the world by measuring the percentage of national income accruing to the top 10% of the population of each country ranks BRICS countries as being among the most unequal in the world. In India and Brazil, the top 10% get 55% of total national income. In Russia, it is 46% and in China 41% (World Inequality Lab, 2018: 9). In South Africa, the top 10% accounted for 66% of national income (World Inequalities Report, 2018: 146). All five countries have seen this disparity increase since 1990. The growth in inequality comes despite the fact that three of these countries, India, South Africa, and Brazil, have programs specifically aimed at more inclusive growth and a more equitable distribution of national wealth. Equality is one of the core tenets of the ruling Communist Party in China. Russia too sees reduction of inequality as a policy goal and has reformed its wage regulation to ensure greater distribution of wealth (World Economic Forum, 2017).
India presents a paradox as far as equitable growth is concerned. Since liberalization in 1991, it has enjoyed very high rates of growth. The GDP has increased more than nine-fold from US $275 billion in 1991 to US $2.3 trillion (Turaga et al., 2018: 26). During this period, the government has enacted legislations to implement a number of welfare schemes to ensure greater growth equity. It has also implemented programs for providing employment, food security, and access to education. India also put in place, soon after Independence, a program of reservations (affirmative action) that is intended to overcome the inequities imposed on large sections of its population because of rigidities in its caste system. Yet, both in terms of wealth distribution and in terms of social indicators, its performance has been poor compared to many developing nations at similar stages of development, in some respects even worse than Least Developed Countries (LDCs) in sub-Saharan Africa. In health care, while there have been improvements in health indicators, inequalities between different regions has increased since 2001 (Goli and Arokiasamy, 2014: 162). In 2014, the UNDP Gender Equality Study ranked India 135 out of 187 countries, In addition to barriers to social mobility imposed by the caste system, social exclusion and low levels of human development seem to be major detriments to inclusive growth (Onis, 2016).
There are two major problems that negatively affect the effectiveness of welfare programs in India. The first is lack of adequate resources. India spends only about 8% of its GDP on social services, which is not just behind OECD countries which spend 20%, but also behind countries like Brazil and South Africa which spend more about 16% of their GDP on social welfare schemes. The second is the inefficiencies in implementation with actual income transfers to those targeting being much less than funds allocated because of very high transaction costs (Jha, 2014).
South Africa reflects a similar pattern. Efforts to remove inequalities in growth inherited from the apartheid government have been hampered by inefficiencies in implementation of equitable growth policies and also by lack of resources. When the new democratic government came to power in South Africa in 1994, it had the task of reducing inequalities in a country that was deeply divided, not just economically but also spatially. The black townships were separated from white areas, and these townships lacked the basic resources and infrastructure needed to ensure a basic minimum standard of living. Thus, the problem of equitable development was not just related to equitable distribution of wealth but also to balanced development of regions which had developed unequally (McDonald and Piesse, 1999). However, equitable growth policies that were enacted by the government primarily focused on overcoming inequalities brought about by decades of white apartheid government by bringing more blacks into employment and firm ownership through the BEE program. The Broad-Based Black Economic Empowerment (BBBEE) legislation emphasized black participation in ownership and management, increasing the number of blacks in the workforce and increasing indirect benefits to the black population through preferences in procurement contracts and enterprise development (Horwitz and Jain, 2011: 302). What was required, but was lacking, was greater investment in sectors that would have increased productivity in the economy, such as education and health care, better physical infrastructure, and access by providing rural workers with access to productive land. South Africa continues to perform very poorly in most socio-economic indicators. Income inequality remains high, with 60% of the population taking in 10% of national income. Lack of access to basic education hampers access to higher education, with only 1.5% of the population having a degree in 2012. Land distribution remains skewed, with 8% of the population owning 70% of the land, after almost two decades of post-apartheid governments (Omilola and Akanabi, 2014: 566). Poverty continues to remain widespread, with inequality hindering poverty reduction efforts across South Africa (Barros and Gupta, 2017: 29).
Brazil is unique among BRICS countries in terms of both improvements in income equality and socioeconomic indicators since 2000. Brazil was the only BRICS country which saw its Gini coefficient decrease between 1990 and 2010. The other four BRICS nations saw income inequality increase with an increase in economic growth. Brazil also saw the steepest decline in infant mortality