The Rise of the Middle Class in Brazil María Gómez León Departamento de Ciencias Sociales Universidad Carlos III de Madrid

The Rise of the Middle Class in Brazil

María Gómez León

Departamento de Ciencias Sociales Universidad Carlos III de Madrid

11th _{European Historical Economic Society Conference}

4 – 5 September, 2015 (Pisa, Italy) Session: Distribution in Latin America

 The rise of the middle class during processes of economic development has become a major topic of

interest (Banerjee and Duflo 2008; Birdsall 2010; Easterly

2001; Solimano 2008).

 This interest has been fuelled by the increase of this

social group during the last decade in Latin America

(Cruces et al. 2011; Ferreira et al. 2006).

 The Brazilian case: rapid economic growth

accompanied by decreasing inequality, reduction of absolute poverty and the enlargement of the middle

class (Cacciamali 2011; Côrtes-Neri 2010).

 Comparable episodes of fast economic growth took

place in Brazil between the late 19th _{and mid-20}th

centuries (Goldsmith 1986).

 When and how did the middle class emerge in Brazil?

 Is there a connection between the rise of the middle

class and inequality?

INTRODUCTION

The Economist, 12 November, 2009

SOURCES AND DATA

ACTIVE POPULATION DATA (BY PROFESSION)

Demographic censuses (1872, 1920, 1940 and 1950) from Directoria Geral de Estatísitica (DGE) and

Estatísitcas Históricas do Brasil from Instituto Brasileiro de Geografía e Estatística (IBGE 1990).

INCOME DATA

Historical Statistics (IBGE 1990); Official information on wages compiled by Lobo (1978) and complementary

information from Bértola et al. (2006) and Monasterio (2010).

Differences between urban and rural workers based on information from Klein (1995), Nunes (2003) and Monasterio (2010).

4 0.2 0.3 0.4 0.5 0.6 G in i 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 Year

Bértola et al.,(2012) Milanovic et al.,(2010)

Gómez León Prados de la Escosura (2007)

Brazil’s inequality trends (1840-1950)

MEASURING THE MIDDLE CLASS

 Polarisation measures test the formation of different groups of income along the distribution

_{*Extreme situation: population is equally distributed between two distant poles}

Foster and Wolfson (1992)

BIPOLARISATION = Absence of a Middle Class  Cruces et al. (2011)

TRIPOLARISARION = Presence of a Middle Class

 NEW Middle Class Index

 MIDDLE CLASS INDEX IN TERMS OF INCOME Esteban, Gradín and Ray’s (2007) polarisation measure:

Identification factor: individual feeling in respect to other individual of his group  income

Alienation factor: individual feeling in respect to the rest of individuals of other groups  income

 MIDDLE CLASS INDEX IN TERMS OF STATUS

Zhang and Kanbur’s (2001) polarisation measure:

Identification factor: determines homogeneity within the group  status

Alienation factor: determines differences across groups  income

6

0 -0.02 0.04 0.02 M id dl e C la ss In de x 18 40 18 50 18 60 18 70 18 80 18 90 19 00 19 10 19 20 19 30 19 40 19 50

Export expansion and Industrial development New professions

Slavery

Hierarchical and stratified society Essential rural economy

Slavery abolition Free work reinforced Coffee crisis

Industrial spurt

Vargas regime ISI era

Social and political repression Credit diverted to the

coffee sector

Industry strangulation

RESULTS

Middle Class Index (in terms of income)

Middle Class Index (in terms of status)

(5-year end-centred moving averages)

RESULTS (cont.)

8 1 2 3 4 0 M id d le C la ss I n de x 1 84 0 1 85 0 1 86 0 1 87 0 1 88 0 1 89 0 1 90 0 1 91 0 1 92 0 1 93 0 1 94 0 1 95 0 Year

0 1 2 3 4 M C i n d e x ( s ta tu s ) 0 -0.02 0.04 0.02 M C i n d e x ( in c o m e ) 1 8 4 0 1 8 5 0 1 8 6 0 1 8 7 0 1 8 8 0 1 8 9 0 1 9 0 0 1 9 1 0 1 9 2 0 1 9 3 0 1 9 4 0 1 9 5 0 Year

Middle Class Index (income vs. status)

(5-year end-centred moving averages)

10 0.2 0.25 0.3 0.35 G in i In d e x -0.02 0 0.04 0.02 M C I n d e x 1 8 4 0 1 8 5 0 1 8 6 0 1 8 7 0 1 8 8 0 1 8 9 0 1 9 0 0 1 9 1 0 1 9 2 0 1 9 3 0 1 9 4 0 1 9 5 0 Year

Middle Class Inequality

RESULTS (cont.)

Middle Class

and Inequality



No support for the

idea of persistent inequality rooted in Brazilian colonial history.



MC index shows the emergence of a middle class

in Brazil in the the early 20

th

century with a reversal from the Vargas era.

 Seeds for the middle class efflorescence were sowed in the late 19th _century

in a context of economic stagnation but decreasing inequality.

 Emergence of the middle class in the early 20th _{century in a context of industry}

development, modernization, and domestic market expansion.

 In a context of economic growth but with political repression and growing

inequality, the middle class declined dramatically between 1930 and 1950.

CONCLUSIONS

Universidad Carlos III, Madrid

mgomez3@clio.uc3m.es