The officials who decided on next year’s World Cup location certainly thought it would be a happy story. Brazil loves soccer (okay, football), so let’s put the World Cup in Brazil, where everyone will be cheering. Turns out, that’s not exactly the case.
Brazil is rife with protests these days, caused by people who like football well enough, but not at the expense of decent social services. While it’s definitely an eye-opener, it might also be an indicator of what’s to come from the world’s nascent middle classes.
Like a lot of the developing world, Brazil has seen the birth of a bona fide middle class over the past decade. A surge in commodity prices has been part of it, as has an accompanying shift in the economy towards more consumer spending. As a result, figures from the Brazilian government suggest that as of 2009, 52 per cent of the population (or 95 million people) were “middle class,” up about 31 million from a decade earlier. You can argue about whether the number is over-stated, or how middle class is defined, but regardless, it’s clear there has been a sizable increase in the number of Brazilians who can not only buy the necessities of life, but a bit more too.
So what is the problem? Well, at the same time that Brazilians were moving away from their hard-scrabble existence, their social services and infrastructure were breaking down, and prices were going up as well. Private services for things like health care exist, but with more people vying for them, they have become less attainable, not more. So despite having more disposable income, many now feel that in some ways their lives are getting worse. A piece on the OECD website by economist Helmut Reisen suggests it is an example of the “Easterlin Paradox” – the notion that happiness grows more slowly than incomes.
Mr. Reisen also invokes the notion of “exit, voice and loyalty” as the basic categories that drive societal change, and suggests they have a role in what we are seeing in Brazil. When people leave the country for cities, that is “exit.” At this point in Brazil, however, the new middle class is unhappy with the provision of services, and hence have moved on to “voice.” Basically, they are expressing their willingness to pay higher taxes for the things they deem worth it – but those things do not include new football stadiums. Once you create a middle class – and in Brazil’s case, it is still a fragile and relatively poor middle class – you create a class that also wants to give things a bit more thought. They will not be bought off as easily as they might have before with trophy distractions.
Over the next couple of decades, if estimates by organizations like the OECD are to be believed, the size of the global middle class is going to double, with country after developing country seeing their populations transformed. That’s a great phenomenon, but it is also one that needs to be well-managed. As Brazil’s experience clearly shows, once people have a little more discretionary income, they might want a lot of other things as well.
Linda Nazareth is the principal of Relentless Economics Inc. and a senior fellow at the Macdonald Laurier Institute.