The Politics of Latin America’s New Middle Class                                          Francis Fukuyama1THE GLOBAL MIDD...
report by the European Union Institute for Security Studies projects that the numbers of middleclass people will grow from...
(Bolivia) to 50 percent (Mexico).7 Another OECD estimate places Latin America’s middle classat 181 million, or 10 percent ...
Table 2 shows the occupational structure of those designated "middle class" by incomecharacteristics. Together, these tabl...
and hard work, but she may also hit it due to a rising tide that is lifting all boats. Social habitsmay not change just be...
populations; it became very widespread in the United States beginning in the 1820s as thefranchise was broadened.18 The Un...
political system by the poor. This is what happened in Thailand: while middle class Thais ledthe pro-democracy movement ag...
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Fukuyama describe la importancia de entender bien quien es la clase media en América Latina para poder diseñar políticas adecuadas.

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Politicsof l asnewmiddleclassfrankfukuyamafinal_1

  1. 1. The Politics of Latin America’s New Middle Class Francis Fukuyama1THE GLOBAL MIDDLE CLASSPerhaps no other development portends as much political change as the growth over the pastdecade of the middle class across a range of countries in Latin America. This phenomenon isclosely related to another trend, the decline of income inequality that has also been notable forthe region as a whole.The political implications of this change are potentially enormous. Latin America as is wellknown has been the most unequal part of the world in terms of income distribution.2 The gapbetween elites and poor people has fed polarized politics and instability. At one time, thismanifested itself as a fight between Marxist and other extreme-Left groups, and anti-Communistconservatives. Today, it is a struggle between populist politicians pursuing unsustainableredistributive policies, and mainstream democratic parties, many of which nonetheless fail toconnect with the poor.The rise of a strong middle class in Latin America shows a way out of this polarization: if themedian voter is no longer a poor person, but an individual with assets and education, he or shewill presumably have a greater stake not in upending the system as a whole, but in sound publicpolicies that will preserve the value of those assets and protect his or her familys social position.This promises the emergence of the kind of politics more typical of the developed world, withcontestation between center-left and center-right political parties who will differ on the degreeand forms of redistribution, but which will be in fundamental agreement over commitment toliberal democracy and economic growth driven by market forces.But will this kind of society and politics actually emerge? While the shift in Latin Americassocial structure has been highly encouraging, the answer is that it is way too early to count thesegains as permanent. And even if a strong middle class does emerge, the impact on politics couldunder certain future conditions be more destabilizing than the reverse. We nonetheless needpublic policies that encourage growth of this segment of the population.There has been a huge amount of writing in the past decade over the arrival and future prospectsof a new global middle class that will shape the world economy and politics over the next twogenerations. A Goldman Sachs report projects that spending on the part of the worlds middlethree income quintiles will rise from the current 31% of total income to 57% in 2050.3 Another 1 Francis Fukuyama is Olivier Nomellini Senior Fellow at Stanford Universitys Freeman Spogli Institute, and author most recently of The Origins of Political Order: From Prehuman Times to the French Revolution. 2 See Luis Lopez-Calva and Nora Lustig, "Explaining the Decline in Inequality in Latin America:Technological Change, Educational Upgrading, and Democracy," in 3 Dominic Wilson and Raluca Dragusanu, The Expanding Middle: The Exploding World Middle Class andFalling Global Inequality (Goldman Sachs Global Economics Paper No. 170, 2008), p. 4. 1
  2. 2. report by the European Union Institute for Security Studies projects that the numbers of middleclass people will grow from 1.8 billion in 2009 to 3.2 billion in 2020, and 4.9 billion in 2030 (outof a projected global population of 8.3 billion).4 The bulk of this growth is slated to occur inAsia, and particularly China and India, but all regions of the world including Latin America willparticipate in this trend.Many of the countries in Latin America had already reached middle or even upper middleincome status well before their Asian counterparts. Nonetheless they have also registeredsignificant gains with regard to an expanding middle class. In 2002, 44% of the regionspopulation was classified as poor; this had fallen to 32% by 2010 according to ECLAC.5 This isparticularly notable in Brazil, where many observers have pointed to the emergence of a newmiddle class with significantly increased levels of personal consumption. (The performance ofindividual Latin American countries varies widely in this regard, however.) Nora Lustig and hercolleagues have documented an impressive fall in income inequality, as measured by Ginicoefficients, that stretched across much of Latin America over the decade of the 2000s, after aprolonged period when they were on the rise.6WHO IS MIDDLE CLASS?Before we take any of these figures as gospel, however, we need to define what it means to bemiddle class. There is a sharp distinction in the way that economists and sociologists think aboutthe term. The former tend to define middle class in simple income terms. A typical way is tosimply choose some band of income distribution such as the middle 1 to 3 quintiles, or 0.5 to 1.5times the median income. This makes the definition of middle class dependent on a societyswealth and thus incomparable cross-nationally; being middle class in Brazil means a much lowerconsumption level than in the United States. To get past this problem, some economists choosean absolute level of consumption (ranging from a low of US$5 a day, or $1800 PPP per year, upto a range of $6,000-30,000 annual income). This fixes one problem but creates another, sincean individuals perception of class status is often relative rather than absolute; as Adam Smithnoted in the Wealth of Nations, a pauper in 18th century England might live like a king in Africa.Using income definitions produces different estimates for the size of the Latin American middleclass. Using an absolute measure of $US2-20 per day PPP gives range from 55 (Argentina) to 77percent (Peru) of the total population being middle class for a group of selected countries byOECD estimates. Using a median income definition produces lower numbers from 36 percent 4 European Union Institute for Security Studies, Global Trends 2030: Citizens in an Interconnected andPolycentric World (Paris, 2012), p. 28. 5 This figure quoted in Francesca Castellani and Gwenn Parent, Being "Middle Class" in Latin America(OECD Development Centre, Working Paper No. 305, October 2011), p. 9. 6 Nora Lustig and Luis Felipe Lopez-Calva, Declining Inequality in Latin America: A Decade of Progress?(Washington, DC: Brookings Institution Press, 2010). 2
  3. 3. (Bolivia) to 50 percent (Mexico).7 Another OECD estimate places Latin America’s middle classat 181 million, or 10 percent of the global middle class population.8Sociologists, in a tradition beginning with Karl Marx, tend not to look at statistical measures ofincome but rather at how ones income is earned, occupational status, level of education, andassets rather than income. Marxs original definition of bourgeoisie referred to ownership of themeans of production. One of the characteristics of the modern world is that capital ownershiphas become vastly democratized through stock ownership and pension plans. Even if one doesnot own large amounts of capital, working in a managerial capacity or profession often grantsone a very different kind of social status and outlook from a wage earner or low-skill worker.My own definitional preference is the sociological one since I am interested here in the politicalimplications of a growing middle class. Simple measures of income or consumption, whetherrelative or absolute, tell you relatively little about the political inclinations of the person inquestion. One of the longstanding theories of political science, stated most forcefully by SamuelHuntington in his book Political Order in Changing Societies, is that instability is driven by agap between expectations and reality with regard to both political participation and jobopportunities.9 A poor person of low social status and education who rises out of poverty andthen sinks back by this theory is less politically destabilizing that a middle class person--someone, say, with a university education--who cannot find a job and "sinks" into a level ofconsumption that is nonetheless several times higher than that of the supposedly middle classformer poor. From a political standpoint, the important marker of middle class status would thenbe ownership of assets (a house or apartment, or consumer durables) which could be taken awayby the government, and level of education.If one uses education as a marker of middle class status, its size shrinks in a dramatic fashion.Table 1 shows educational attainment levels of the "middle class" measured by income inArgentina, Brazil, and Chile. In Argentina, less than 18 percent of the middle class has a highschool education; in Brazil, less than 2 percent are college educated. Table 1: Middle Class Education Levels10 Argentina Brazil Chile primary completed 34.7 52.1 17.4 secondary completed 17.9 23.2 24.5 tertiary completed 6.6 1.9 5.4 7 OECD (2011), p. 11. 8 Homi Kharas, The Emerging Middle Class in Developing Countries (Paris: OECD Development Centre,Working Paper 285, Jan. 2010), p. 16. 9 Samuel P. Huntington, Political Order in Changing Societies. With a New Forward by FrancisFukuyama (New Haven, CT: Yale University Press, 2006). 10 OECD (2011), p. 22. 3
  4. 4. Table 2 shows the occupational structure of those designated "middle class" by incomecharacteristics. Together, these tables suggest that the middle class revolution in Latin Americais perhaps a bit less impressive than at first glance. One large occupational group, from 30-50percent depending on country, are what in Europe would be designated as "working class" inmanufacturing, construction, or transport. Reflecting the regions poor performance in education,no more than 20 percent in any country could be considered professionals (many in this groupare probably teachers). Many of the rest are former poor, owning small shops or restaurants, andworking in the informal sector, who have increased their incomes due to general economicgrowth. Table 2: Middle Class Occupations11 Argentina Uruguay Brazil Chile Costa Rica Mexico PeruAgriculture 4.0 1.1 19.5 16.5 18.4 12.7 32.6Mining Water Elec 11.5 4.8 NA 2.6 1.7 1.0 1.5Manufacturing 26.6 16.8 16.3 15.0 14.2 17.4 9.9Construction, Transp 5.8 17.0 18.0 22.8 18.1 20.9 16.4Wholesale hotels rest 16.7 21.8 21.0 16.2 22.5 22.6 23.8Public Edu Health 18.5 20.5 9.2 11.2 9.3 9.3 8.7Other services 16.9 17.9 16.1 15.7 15.8 16.1 7.1THE MIDDLE CLASS AND POLITICSThere has been a great deal of theorizing as to why the existence of a middle class is important,both economically and politically. William Easterly has linked what he labels a “Middle ClassConsensus” to higher economic growth, education, health, stability, and other positiveoutcomes.12 Economically, the middle class is theorized to have "bourgeois" values of self-discipline, hard work, and a longer-term perspective that encourages savings and investment.13Many analysts trace this view to Max Weber, whose famous work The Protestant Ethic and theSpirit of Capitalism inserted a values-based variable into the explanation for economic growth.Unfortunately, many of these observers misunderstand Weber. Bourgeois values by his accountare not endogenous to growth; rather, they are due to totally exogenous factors like the rise ofPuritanism in 16th century Europe.14 A poor person may hit a certain income level due to thrift 11 OECD (2011), p. 23. 12 William Easterly, The Middle Class Consensus (World Bank, July 2001). 13 See Luis F. Lopez-Calva, Jamele Rigolini, and Florencia Torche, Is There Such a Thing as Middle-ClassValues? Class Differences, Values, and Political Orientations in Latin America (Washington DC: Center forGlobal Development, Working Paper 286, Jan. 2012.) 14 There has in fact been an exogenous religious movement in Latin America with the conversion ofCatholics to evangelical Protestantism, with a number of scholars noting that this process has indeed yielded thekind of improved social indicators that Webers theory predicts. The degree to which this constitutes a durablephenomenon requires further study. See David Martin, Tongues of Fire. The Explosion of Protestantism in Latin 4
  5. 5. and hard work, but she may also hit it due to a rising tide that is lifting all boats. Social habitsmay not change just because one has become richer. There is considerable evidence that theincrease in consumption of the former poor in Brazil has been fueled by an unsustainableincrease in available credit. As in the United States during the boom of the 2000s, this has notproduced classic bourgeois values but rather the opposite: a decrease in the propensity to saveand a sense of entitlement to ever-increasing levels of consumer spending.15My main concern here is however the impact of a growing middle class on politics. There areseveral channels by which a middle class theoretically can impact the performance of politicalsystems. As noted earlier, a strong middle class with some property and some education is morelikely to believe in the need for both property rights and democratic accountability. This is not acultural issue but a matter of self-interest: one wants to protect the value of ones assets fromrapacious or incompetent governments, and is more likely to have time to participate in politics(or to demand the right to participate) because higher income provides a better margin for familysurvival.This view is a bit more than a theory; a number of cross-national studies, including a series ofrecent Pew surveys, have shown that middle class people have different political values than thepoor: they value democracy more, want more individual freedom, are more tolerance ofalternative lifestyles, etc.16By contrast, countries with large numbers of poor or marginalized voters and small elites havetended to produce populist politics. The rise of Hugo Chavez, Evo Morales, and Rafael Correain the ALBA countries is less the cause of instability than a symptom of deep inequalities inthose societies, and of the failure of their erstwhile democratic parties to develop programs thathad relevance for the poor. Between 1996 and 2003, Argentina’s middle class shrank by about20 percent; while I cannot prove causality, this surely must have had some effect on the PeronistParty’s shift from neo-liberal policies in the early 1990s to populist ones in the late 2000s.17A new factor in the last decade has been the rise of the internet and social media, which havebeen taken up much more readily by the middle class than by the poor. Improvedcommunications technology does not necessarily imply a particular form of politics and can becontrolled or used by authoritarian governments. Nonetheless, access to information has beengreatly democratized over the past generation, and the impact (as in the case of the Arab Spring)has been overall beneficial for democratic values.Apart from abstract support for democracy, the rise of a middle class should also provide socialsupport for an end to clientelistic politics and anti-corruption. Clientelism can be seen as anefficient form of political mobilization in countries with relatively poor and less educatedAmerica (Oxford: Basil Blackwell, 1990); David Stoll, Is Latin America Turning Protestant? The Politics ofEvangelical Growth (Berkeley, CA: University of California Press, 1990). 15 Patricia Mota Guedes and Nilson Vieira Oliveira, Democratization of Consumption (Brauder Papers 02,2006). 16 Ronald Inglehart and Christian Welzel, Modernization, Cultural Change, and Democracy: The HumanDevelopment Sequence (New York: Cambridge University Press, 2005); The Global Middle Class (Washington,DC: Pew Global Attitudes Project, 2009). 17 OECD (2011), p. 29. 5
  6. 6. populations; it became very widespread in the United States beginning in the 1820s as thefranchise was broadened.18 The United States ended the patronage system during theProgressive Era both at a national and municipal level due to the rise of middle class groupswhose interests were hurt by this kind of politics. Anti-corruption efforts in the present worldare frequently spearheaded by newly empowered middle-class entrepreneurs, professionals, andsocial reformers.A DOUBLE-EDGED SWORDWhile the rise of a middle class is generally good for liberal democracy, the link is by no meansautomatic, and in some cases middle class citizens can actually collaborate in the weakening orundermining of healthy political institutions. Many observers have pointed to the fragility ofLatin America’s recent economic gains. Growth has been heavily driven by commodity exportsto Asia, rather than indigenous industrialization; if the Chinese growth engine slows down, as itinevitably will, the Western Hemisphere will suffer as well. A global recession could havedisastrous consequences for the former poor, particularly if their recent consumption levels werefinanced by debt rather than rising productivity. No group is more dangerous politically when itsexpectations are disappointed than the middle class; Huntington pointed out that revolutions arealmost never organized by the poor but rather by middle class individuals who can’t fit into thesystem. Even the most economically successful countries in the region like Chile or Brazil donot have a clear path to becoming high income ones; their existing employment bases areconstantly being threatened by new rising powers in Asia. A prolonged period of stagnation oreconomic decline may set off a new form of politics, perhaps of a sort we have not seenpreviously. Greece today is a living laboratory of the political consequences of a country whosecitizens are losing their middle class status.There are other ways in which the middle class can become a liability rather than a benefit to ademocratic political system. One’s specific occupational status matters a great deal. In pastgenerations, a significant portion of the middle class in Latin America achieved that statusthrough public employment, either in the public sector or in parastatals linked to the government.This type of middle class has many negative implications for democracy: employment is oftenclientelistic; public employees have a stake in a large state sector; the government rather thanprivate entrepreneurship is seen as a road to wealth and status. Francisco Ferreira finds thatsome of the decline in Brazil’s levels of inequality is actually due to the shift in middle-classemployment away from the state sector.19 If governments seek to make up for falling privatesector employment through public sector expansion, we will be back to the old Latin America ofthe mid-20th century.Moreover, the size of the middle class relative to the rest of the society matters. When themiddle class still constitutes a minority of the population, it can oftentimes side with elitesagainst democracy because it fears that its wealth and status will be threatened by access to the 18 This is a topic that I will discuss further in the second volume of my book, The Origins of PoliticalOrder. 19 Francisco H. G. Ferreira and Phillippe G. Leite, "Trade Liberalization, Employment Flows and WageInequality in Brazil," Journal of Economic Literature, 2006. 6
  7. 7. political system by the poor. This is what happened in Thailand: while middle class Thais ledthe pro-democracy movement against the military in the early 1990s, they sided with the militaryagainst former prime minister Thaksin in the 2000s because they feared his brand ofredistributionist populism would kill the Thai economic miracle. This has led to a sharppolarization of the country and prolonged political crisis that is still not resolved. Somethingsimilar exists in China. The Chinese middle class is estimated to be around 300-400 million, or aquarter of the whole population. While it is hard to know their ultimate political preferencesgiven the authoritarian political system, there is evidence that they too fear a rapid transition todemocracy that would open up huge demands for redistribution on the part of China’s rural poor.So for a true middle class democratic consensus to emerge, this group needs to constitute a clearmajority of the population such that redistributionist schemes do not threaten to derail alleconomic growth.CONCLUSIONAt this point in Latin America’s history, it is difficult to conceive of the middle classes openlyturning against democracy as they did in the 1960s and 70s. So far, the post-dictatorshipdemocratic consensus has held fairly strongly throughout the region and middle class groupshave shown little willingness to, for example, turn to the military to prevent the rise of populistpoliticians.The bigger immediate challenge is whether middle class voters will coalesce behind modern,programmatic political parties, or whether they will be co-opted by clientelistic or personalisticparties that attract followings based on their ability to distribute public resources and jobs tofollowers like the Partido Justicialista in Argentina or the PMDB in Brazil. In the United States,economic modernization and the rise of a new middle class signaled the end of clientelism andrelated forms of corruption. But in Greece and Italy, clientelism has survived despite high levelsof economic development; part of the reason that they, and the European Union as a whole, arein trouble today is because of the continuing role of clientelistic politics in their public sectors.There is no automatic mechanism that links a growing middle class to democracy. Social groupshave to be organized; and until middle-class interests are represented by political parties, theywill have little effect on the political system. Democracy in the region will not become fullyinstitutionalized and stable until each country governed by competitive center-Left and center-Right parties that offer different policies and programs, while sharing a common commitment toliberal democratic values. And democracy will not be of high quality until it begins to revolvearound issues and policies rather than personalities, jobs, and individual perks. The rise of abroad middle class does not guarantee either of these outcomes. But it is hard to envision eithera stable democracy or a non-clientelistic state emerging in the absence of this kind of a socialbase. 7