Absolute poverty is an old and universal human problem. Over the past few centuries, the spread of property rights, commerce, capital accumulation, and mass production has produced a dramatic decline in poverty and a steady rise in living standards across much of the world.
The debate over inequality is different. The scientific and empirical literature remains far less conclusive about whether income inequality, as such, is associated with extreme poverty, causes slower growth, crime, or the many social evils routinely attributed to it. Too often, the word inequality is used as if it identified a single phenomenon with a single cause and a single remedy. It does not.
Some differences in income arise from production, enterprise, thrift, innovation, and the voluntary choices of consumers. Others arise from political privilege, legal barriers, subsidies, cartelized markets, and the coercive machinery of the state. To collapse these two phenomena into one moral category is to miss the essential question: how was the income obtained, and was anyone compelled to pay for it?
This institutional distinction between sources of inequality is especially important in Brazil. The conventional cure for inequality is almost always more government: more intervention, more redistribution, more affirmative policies, more bureaucracy, and more political management of incomes. Yet this prescription treats the state as the physician without first asking whether it is also one of the main sources of the disease.
Every action of the state changes the distribution of income. Taxation, regulation, public employment, subsidized credit, procurement, licensing, inflation, and legal privileges continuously move wealth from some groups to others. Many of these transfers do not reduce harmful inequality; they create it. Brazil’s public-sector supersalaries are among the clearest examples.
Productive Inequality and Political Inequality
Not all inequality is socially harmful. In a society built on private property and the division of labor, income differences naturally emerge from differences in talent, risk-taking, saving, skill, judgment, choices, entrepreneurship, and the ability to serve consumers. The successful entrepreneur does not become rich by issuing decrees. He becomes rich by producing goods and services people voluntarily choose to buy.
These productive inequalities are not a burden on society; they are signals. Such signals guide labor and capital toward uses that consumers value more highly. They reward innovation, specialization, and better coordination—they are part of the mechanism by which the market discovers what should be produced, by whom, and at what cost.
Murray Rothbard emphasized that economic development moves resources toward more profitable lines of production because profits reveal where resources are being used more effectively to satisfy human wants. A larger income earned in that process reflects value creation—it is not a political entitlement, and it does not require a protected office or a legal privilege.
Political inequality is different. It arises when businessmen, bureaucrats, politicians, and organized pressure groups use the state to obtain incomes they could not earn under open competition—through lobbying, entry barriers, subsidies, protected jobs, and administrative devices that turn political proximity into private gain.
State agents themselves also benefit. Judges, prosecutors, legislators, administrators, regulators, and public employees can use coercive institutions, corporatist lobbying, judicial decisions, and budgetary inertia to secure incomes far above those of the taxpayers who finance them. These incomes are not tested by profit and loss. They are not disciplined by consumer choice. They are secured by law, taxation, and political power.
This kind of inequality does real social damage. It weakens competition, replaces market prices with administrative allocation, raises taxes and debt, distorts economic calculation, and rewards rent seeking. It creates a caste of political beneficiaries: officeholders, insiders, protected firms, and public-sector elites whose prosperity depends on the state rather than on serving consumers.
Brazil’s Supersalaries and the Misallocation of Talent
Brazil is a relatively poor country. Average monthly income is roughly equivalent to only a few hundred dollars, and almost half the population earns less than that. A large share of Brazilians live near the poverty line or depend materially on state assistance. Against this background, the privileges enjoyed by the upper layers of the public sector are not merely an accounting curiosity, they are a moral and economic scandal.
One of the most attractive career strategies in Brazil is to enter public employment, or to build a business model around access to it. The country has roughly 13 million public employees, about 15 percent of the active workforce. Public-sector wages are, on average, about twice those in formal private-sector employment, and the attraction is reinforced by job stability, statutory advantages, longer paid leave, pension privileges, and income supplements that can substantially increase total compensation.
For educated members of the middle class, the prize is even greater: a coveted position in the municipal, state, or federal bureaucracy, especially in the upper ranks of the judiciary, legislature, and executive branch. Many of Brazil’s most promising young people spend years preparing for civil-service examinations. The result is a deep distortion of incentives. Talent that might have gone into entrepreneurship, innovation, and wealth-creation is redirected toward obtaining protected positions inside the state.
At the top of the public payroll, the contrast becomes grotesque. Monthly compensation among senior judiciary, legislative, and executive officials can reach levels unimaginable to ordinary Brazilians—and, when benefits and indemnities are added, it can climb far beyond the formal constitutional salary cap.
By way of illustration, among the top 10 percent of salaries in the judiciary, legislature, and executive branch, once benefits are added to base compensation, these salaries can average more than $12,000 to $14,000 per month. That is how, for example, in 2025 a judge in the state of Santa Catarina received more than $620,000 in annual earnings.
Brazil tops international rankings for public-sector supersalaries, at a level 21 times higher than that of the runner-up, neighboring Argentina.
These are not isolated anomalies. Because many payments are classified as indemnities or reimbursements, they can escape the salary ceiling and expand almost without limit. They also generate long-term fiscal pressure through special pension rules. Brazilian judges can earn multiples of what comparable judges receive in the United States or Europe, even though those countries generally provide better public safety, infrastructure, sanitation, education, and health services.
The public pension system for civil servants is another part of the same problem. Public employees do not fully finance the costs of their own special retirement arrangements. The remainder is covered by taxes, debt, and inflation. The result is a transfer from a poorer population to a protected political class. It is difficult to imagine a clearer example of harmful inequality.
The contrast is stark: a poor population finances a public-sector elite with rich-country compensation while receiving services that often resemble those of a much poorer country.
The State as a Machine for Privilege
The supersalary problem is not an exception. It is a concentrated example of a broader pattern. Inflationary finance, subsidized credit for large firms, bad policing, unequal access to sanitation and infrastructure, failing public education, politicized health services, regulatory barriers, and politically-designed affirmative programs all tend, in different ways, to favor organized interests over dispersed taxpayers and consumers.
The groups that benefit most from government are rarely the poorest or least connected. They are often rich regions, organized associations, large corporations, public-sector unions, political entrepreneurs, and businessmen skilled at navigating the bureaucracy. The more resources are centralized in the state, the more society is pushed toward dependency, lobbying, corruption, and the permanent search for legal favors.
This is the illusion Frédéric Bastiat warned about: everyone tries to live at everyone else’s expense, and the state becomes the instrument through which the attempt is made. In such a system, it is often more profitable to secure a political advantage than to satisfy consumers. The state does not abolish inequality. It changes its source, replacing market-tested rewards with politically-distributed rents.
The priorities of a developing country are inverted when abnormal privileges such as Brazil’s public-sector supersalaries become routine while basic services remain poor. The most fundamental inequality created by the state is the division between those who pay for political privileges and those who collect them. Once that division is ignored, every discussion of inequality becomes confused.
The right question is not whether incomes differ. They always will. The right question is whether high incomes come from productivity, saving, investment, innovation, and consumer satisfaction, or from coercion, legal privilege, institutional capture, and corporate protection. The first kind of inequality is compatible with growth and civilization. The second is parasitic.
Brazil’s supersalaries show that the state is not merely a possible corrector of inequality, it is often one of its greatest creators and protectors. By financing privileges, insulating corporate interests, distorting incentives, and transferring wealth from a poor population to politically-organized groups, the state entrenches the very inequalities it claims to fight.
The great error of many analysts is to demand more government to solve a problem that the government itself helps produce. A serious debate must distinguish inequalities born of production from inequalities born of political appropriation. Without that distinction, the campaign against inequality will only strengthen its most neglected engine: the state itself.
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