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

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1 The Rise of the Middle Class in Brazil María Gómez León Departamento de Ciencias Sociales Universidad Carlos III de Madrid 11 th European Historical Economic Society Conference 4 5 September, 2015 (Pisa, Italy) Session: Distribution in Latin America 1

Madrid 11 th European Historical Economic Society Conference 4

2 INTRODUCTION 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 19 th and mid-20 th centuries (Goldsmith 1986). The Economist, 12 November, 2009 When and how did the middle class emerge in Brazil? Is there a connection between the rise of the middle class and inequality? 2

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).

SOURCES AND DATA ACTIVE POPULATION DATA (BY PROFESSION) Demographic censuses (1872, 1920, 1940 and 1950) from Directoria Geral de Estatísitica (DGE)

INCOME DATA Historical Statistics (IBGE 1990); Official information on wages compiled by Lobo (1978) and complementary information from Bértola et al.

3 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). DGE (1872): Recenseamento do Brasil 1872, p.7 3

4 Gini Brazil s inequality trends ( ) INEQUALITY APPROACH Year Bértola et al.,(2012) Milanovic et al.,(2010) Gómez León Prados de la Escosura (2007) 4

2 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940

5 POLARISATION APPROACH 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 5

distributed between two distant poles Foster and Wolfson (1992) BIPOLARISATION = Absence of a

6 POLARISATION APPROACH 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

the rest of individuals of other groups income MIDDLE CLASS INDEX IN TERMS OF STATUS Zhang and Kanbur s (2001) polarisation

7 Middle Class Index Middle Class Index (in terms of income) (5-year end-centred moving averages) RESULTS Slavery Hierarchical and stratified society Essential rural economy Credit diverted to the coffee sector Industry strangulation Vargas regime ISI era Social and political repression 0 Slavery abolition Free work reinforced Coffee crisis Industrial spurt Export expansion and Industrial development New professions Year 7

02 Slavery Hierarchical and stratified society Essential rural economy Credit diverted to the coffee sector Industry

8 Middle Class Index Middle Class Index (in terms of status) (5-year end-centred moving averages) RESULTS (cont.) Year 8

9 MC index (income) MC index (status) RESULTS (cont.) 0.04 Middle Class Index (income vs. status) (5-year end-centred moving averages) MC (income) Year MC (status) 9

10 MC Index Gini Index RESULTS (cont.) Middle Class and Inequality (5-year end-centred moving averages) Middle Class Year Inequality 10

11 CONCLUSIONS 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 19 th century in a context of economic stagnation but decreasing inequality. Emergence of the middle class in the early 20 th 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

Seeds for the middle class efflorescence were sowed in the late 19 th century in a context of economic stagnation but decreasing inequality.

12 Universidad Carlos III, Madrid 12

THE EVOLUTION OF THE MIDDLE CLASS IN LATIN AMERICA

THE EVOLUTION OF THE MIDDLE CLASS IN LATIN AMERICA Working Paper number 128 August, 2014 Leopoldo Tornarolli Centro de Estudios Distributivos, Laborales y Sociales, Universidad Nacional de La Plata, Argentina