By Vinicius Lummertz*
(Opinion) In April of this year, former president Lula da Silva (Workers’ Party – PT, left) said that the Brazilian middle class “boasts a standard of living that no place in the world does.
A standard of living they don’t have in Europe, “a standard above what is necessary”. And he exemplified: “It is not necessary to have a TV in every room. Just one is enough.
The sophistry on which Lula da Silva embarked is not difficult to achieve since the discussion about the middle class in Brazil is often close to an enigma, wrapped in a mystery.
However, the former president is not 100% wrong, and economic theory has already dealt with this phenomenon, called the high marginal propensity to consume.
Ultimately, this characteristic makes the average Brazilian consumer want to consume all the supposed marginal gain they get from salary or income because they don’t have these goods previously or associate them with the social ascension to such a middle class – this being the most profound and most real dream of the lower income class in all countries – or because they have difficulty in glimpsing and believing in the future and thus saving in the medium and long term.
The big problem is that, in Brazil, the goal of “being a middle-class majority country”, which is one of the foundations of political stability, peace, and prosperity in Western democracies, has never been a central, explicit, and moral objective of Brazilian society, parties, politicians and ruling classes on the left and the right; it still doesn’t come close to being a basic idea-force for the country.
Why has this never happened? Because it would require a radical change in the organization model of the power structures in the country, which are too conservative, and a loss of space by conservatives in all components of the political spectrum that govern the country in accommodating pacts based on “me first”.
The achievements of European countries and their post-war welfare state guided the formation of a robust middle class based on education, productivity, and access to mass consumption.
Especially in the US, the ideal of the middle class is confused with the essence of the American Dream, today radically divided and weakened by the fall of social mobility and consequent shrinking of the middle class.
In the American declaration of independence in 1776, it is assured not only the right to life and liberty but also the pursuit of happiness.
In this century, the economic rise of Canada, Australia, and New Zealand, and in time, the Asian tigers Japan, South Korea, and Taiwan are based on their middle-class models.
Even China, with the state capitalism led by Xi Jinping, who in his country megaproject declares as a priority “to transform China into a middle-class country with increasing access to consumption, public services, and cultural goods.
Back in Latin America, a good portion of the left, more old-fashioned and stereotyped in its Stalinism, Trotskyism, or Gramscism, still looks skewedly at the development of a genuine middle class as an “incubator of the bourgeoisie; the most rustic right-wingers reason in a social Darwinist simplistic way, such as “if you haven’t reached social ascension, it is because you are not competent,” without the slightest notion of the meaning that Tocqueville gave to equity and equality of opportunities in the seminal “Democracy in America”, and of the process of collective affluence that is possible from a balanced development process, with political and economic modernization.
Forming a middle-class country is not a trivial challenge since it requires strong public commitments and principles, a high capacity for negotiation, and covenanting for the gradual construction of overall increases in opportunities and productivity.
Still, perhaps due to the narrow understanding of some political and social segments, the reforms and institutional advances that can lead us to a gain in productivity, opportunities, and greater social affluence are interpreted as “sacrifice” and not as part of a democratic project for the country.
Returning to former President da Silva’s criticism of the supposed “Brazilian middle class”, the consumer market for more sophisticated goods in developed countries developed only after basic standards of “mass consumption” and cultural goods were reached.
Therefore, a German or Japanese middle-class family would hardly buy an additional television or car when obtaining an increase in income.
Because they already have their balance and are in countries with more stable economies, they can spend on travel, leisure, and culture, besides their own education and that of their children, and save.
Brazilians are still far from reaching this stage, something that Lula da Silva himself agrees with when he states that “Brazil would be ready for only 10% of the population.
In reality, a large part of the population that Lula da Silva refers to in his statement as “middle class” would be the families with incomes above 20 minimum wages per month, which are equivalent to the European and North American middle classes in terms of gross purchasing power, but that in Brazil are already part of our “upper-middle class”, or almost upper, even though in practice they are very distant from the upper class in global standards.
However, the issue of consumption and the middle class in Brazil goes far beyond the more moderate behavior of the domestic economy.
One issue that makes Lula da Silva’s statement a sophism is that the consumer goods available to the Brazilian working and middle classes are extremely expensive, compounded by systemic costs, taxes, and interest rates that snowball into debt.
In this issue, added to the relatively low remuneration of both the working class and the supposed middle class, the relative price of goods can reach 5 or 6 times that of a consumer in a developed country.
Thus, the disposable income of the middle-class Brazilian, in families with an income of 5 to 15 minimum wages, after financial costs and taxes, is quite low.
The combination of high product prices with low wages and earnings are cruel poisoned jabuticabas that thrive in Brazil that left aside the central goal of forming a true middle class for its civilizational success.
The inefficiencies of the Brazil Cost surround the production and productivity of Brazilians. The result of much of the effort of Brazilians ends up in the hands of the public sector, the financial sector, and large private groups (oligopolies) that set prices.
Domestic savings and investments gravitate to a relatively low rate of 18% when the reasonable rate would be at least 25%.
That is why we often seek foreign savings and face another problem: most international investors avoid submitting to the complexity of a country that resists institutional evolution.
Da Silva logically understands the strategic importance of consumption and, in particular, the development of a true middle class for the evolution and development of the country.
Otherwise, let’s see what he said in 2008, on national television, when the bursting of the bubble in the American real estate market affected the whole world: “If you are in debt, try to balance your budget first.
But if you have some money in your pocket or received your 13th salary and want to buy a refrigerator, a stove, or change your car, don’t frustrate your dream, afraid of the future”, he said.
And he explained: “If you don’t buy, the store doesn’t sell. And if the store doesn’t sell, it won’t place new orders with the factory. And then the factory will produce less and, in the medium term, your job may be at risk. More didactic, impossible.
Forming a robust internal consumer market such as the one Lula da Silva wants depends on strengthening the middle and working classes.
And this happens when they gain real purchasing power from gains in productivity, a real increase in the level of remuneration, and a reduction in the cost of finance and taxes.
Brazil affirms, even more, its idiosyncrasies when it exalts informality while it hides its conservatism and immobility, sometimes even unconsciously, through sophisms.
The formation of a truly strong middle class must be a manifest destiny for Brazil, with unprecedented economic, social, and political benefits. And around this, we must structure and mobilize.
* Vinicius Lummertz Silva, 60, has a degree in Political Science from the American University of Paris, and did postgraduate work at Harvard University’s Kennedy School.
He has been the Secretary of Tourism of the State of São Paulo since January 2019. He was minister of tourism from April 2018 to December 2019, president of Embratur from June 2015 to April 2018, and national secretary of tourism policy from September 2012 to May 2015.
With information from Poder360