Brazil’s middle-class anxiety and protest in the streets

Bloonmberg NewsJune 19, 2013 

The following editorial appeared on Bloomberg View.

It is tempting to liken this week’s surprising protests in Brazil, which have attracted huge crowds in the country’s biggest cities, to another movement a couple of years ago in the Northern Hemisphere. But there are important differences between Brazil’s unrest and the Occupy Wall Street movement.

Both succeeded in organizing the discontent of the middle class. Both started with specific complaints – in Brazil, a 20- centavos (9 cents) rise in bus fares; in the United States, the excesses of Wall Street after the bailouts of the financial crisis – and soon grew to include a long list of amorphous and unrelated grievances. For Occupy Wall Street, it was everything from the cost of health care to Israeli-Palestinian politics; in Brazil, it includes health care as well as schools, crime, official corruption and public spending on the World Cup in 2014 and the Summer Olympics in 2016.

Another way of looking at both movements is that they were prompted by particular grievances but soon grew to embrace deeper structural inequities. And that is where the differences between the protests become more apparent. U.S. economic anxiety is less palpable than the Brazilian variety, in part because the U.S. is better able to withstand the upheavals wrought by economic turmoil and protect its middle class.

It is probably no coincidence that the Brazilian protests were spurred by a rise in bus fares. (It’s worth noting that the spark behind the Arab Spring uprisings was soaring food prices; increases in food costs tend to destabilize democratic governments in developing nations.) Inflation has been picking up, particularly for food and fuel, and was 6.5 percent at the end of last month. Meanwhile, wage increases have barely kept pace with rising prices.

It all comes after a decade of strong growth. The Brazilian economy expanded at an average of more than 3 percent a year between 2000 and 2010, almost double the rate of the U.S. Much of the growth was driven by demand for raw materials, largely from China. The expansion gave millions of poor Brazilians purchase on a middle-class lifestyle. Combined with the availability of easier credit, Brazilians were able to buy electronics, cars and air conditioners.

Never mind that Brazil by many measures remained a country riven by one of the most unequal distributions of wealth and income in the world. The ascent of the middle class, combined with social programs promoted by President Dilma Rousseff and her predecessor, Luiz Inacio “Lula” Da Silva, seemed secure.

Not so much anymore. Annual growth since Rousseff took office in January 2011 has averaged 2.2 percent and was less than 1 percent for three quarters last year. It is the fragility of the Brazilian economy’s gains, so recently won, that undoubtedly fuels the unrest in Brazil. Whatever else might be said about the U.S. economy, it has proved itself over the last half-decade to be remarkably sturdy.

Rousseff doesn’t lack for reform plans – to Brazil’s tax code, its pension system, its labor laws, to name a few – and they are worth pursuing. It’s unlikely, however, that a dry recital of the necessity of economic reform will mean much to the hundreds of thousands of poor and middle-class Brazilians on the streets this week.

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