Volume 43, Number 171,
October-December 2012
Structural Limits on Economic Development:
Brazil (1950-2005)
Bibiana Medialdea
EXTREMELY POLARIZED INCOME DISTRIBUTION ( ...continuation )

Keeping in mind that a large part of the Brazilian population is salaried and that there is a considerable number of persons that work in the informal economy and receive very reduced incomes, the distribution pattern of current income means that the immense majority of families have very slow income growth and, as such, maintain very restricted consumption capacity, which for broad social groups is approximately at the level of subsistence. In this sense, the distribution of income between capital and work becomes a structural limit that leads to an inflexible consumer market.

Simultaneously, this unequal distribution explains the duality of the consumer market, because while available income for the majority of homes grows slowly and restricts their purchasing power to a basket of basic goods and services, a small part of homes account for extremely elevated proportions of available income and have a high propensity for consuming goods with notable income-elasticity. To prove this, we must complement the functional distribution of income data with distribution of income in personal terms. Brazil is essentially one of the countries in the world whose income inequality is most exaggerated.28 For example, Brazil’s Gini index, about 0.6, is one of the highest in Latin America, and this is the region with the greatest inequality on a global scale.29

There is an abundance of data to back this up: while 10% of the wealthiest population captures 47.8% of available income, a group fifty times as large, with 50% less income, lives with income almost four times lower, 12.5% of the total.30 This also means that 1% of the population, made up of the highest income levels, holds a proportion of the income (14%) that is greater than what the 50% poorest level of the population has. It also must be pointed out that 20% of the lower income population, that is, a large number of people, (currently about 40 million), barely earns 2.4% of available income, which condemns them to live in extremely precarious conditions, with very low levels of consumption. As illustrated in Figure 4, besides irrelevant oscillations, this brutal socioeconomic scenario has been stable from the beginning of available series up through 2005.

The other extreme is the elite, the 10% of the population that is most wealthy, together with other sets made up of qualified professionals, owners of businesses of a certain size, higher-level salaried employees and other social groups, whose purchasing power is notable and extraordinary, according to their income level. They are the ones that sustain the demand for higher-level durable goods, as well as other goods and services, which are partly supplied with internal production and are partly imported. As such, the consolidation of a dynamic market of durable consumer goods is sustained not only by the wealthiest families but also by these intermediate social segments, although the wealthy elite generates the demand for the dynamic market of luxury goods. It is important to consider that even though the social group and their consumption patterns are the minority, the continental magnitude of Brazil means that in absolute figures, the number of consumers and the value of their purchases are extremely elevated. In this way, assuming that this group only represents 20% of the population, that means that in 1950, it was made up of 10 million people, and by 2005, 38 million, which account for 65% of available income,31 and implies that the market is fairly broad. In the same way, although estimates say that between only 1% and 2.5% of the population has access to the luxury goods market, this currently implies a demand of between 2 and 5 million people.

The relationship between income distribution and internal demand does not adhere only to links regarding consumer demand. It also affects the behavior of another decisive component of demand: business investment. The distribution of profit between the different capitalist factions explains the weakness of productive investment. If investment fundamentally depends on expectations of profitability, a simple look at the features that characterize the factions of capital that account for most economic and political power in the country makes evident that there are adverse conditions for sustained growth in investment.

28 Regarding the historical origin of Brazil’s extreme inequality, see Furtado (1995), Dos Santos (1994) and Lessa (2005).

29According to the pnud, this index had a value of 59.0 in 1985, 60.6 in 1990 and 59.2 in 1995
(see: http://hdrstats.undp.org/es/indicadores/67106.html).


30 Data in this paragraph was taken from the ipea (Social Studies Directory), which calculates this data based on the Pesquisa Nacional por Amostra de Domicilios prepared by the ibge. These can be consulted at the portal: http://www.ipeadata.gov.br/.

31 Average for 1976-2005 calculated based on ipea (Diretoria de Estudos Sociais). Can be consulted at the web portal:
http://www.ipeadata.gov.br/.


Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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