Is Venezuela a middle class country?

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Clotilde Palomino, middle class warrior

The past few days, I’ve been going back and forth with Amherst Prof. Javier Corrales on the issue of whether Venezuela is a middle class country. This was with regards to an article he just posted on Foreign Policy on the subject.

His money quote:

Venezuela has been classified as an “upper middle-income” country for decades. Furthermore, the government claims that the country has seen an expansion in the size of the middle class since 2004. In that case, observing that the protests are too middle class seems unworthy of note: What else would one expect from such a country?”

If there were going to be discontent, especially about governance issues, it would come from the middle classes.”

So far so good, but when Javier gets into the data, something simply doesn’t fit. Corrales thinks the data support him … and he’s probably right. I looked at his calculations, and have no easy way to argue his numbers are wrong. However, it just doesn’t feel right to say that Venezuela is a middle class country. (Ah, truthiness rears its ugly head)

For example, according to standard GDP per capita numbers, the top ten percent of Venezuela’s population earns at least $91 per day, or $33,000 per year. We’re talking those are the minimum earnings … for 2.9 million people in our coutry. If you look at the other deciles, the picture of a middle class country – as defined by current international standards – emerges. You may quibble with the numbers, but that is what they are.

This has profound consequences for the analysis of the type of protests we see.

As Javier says,

The distribution of classes today is distinct from that of previous years in which Venezuela experienced explosions of social unrest. In 1990, for instance, the year after the start of violent anti-government protests that took the lives of dozens, approximately 40 percent of Venezuelans fell in the vulnerable categories (mostly poor). As would be expected, in 1989, the majority of protesters came from low-income groups — that was a sizeable segment of the population back then. In 2001-2002, the period of heaviest unrest under President Hugo Chávez, the vulnerable population still represented between 40 and 50 percent of Venezuelan society.

But by 2012, the proportion of poor was smaller: only one decile.  Two formerly poor deciles, on average, had entered the lower middle class. One could argue that the size of the middle might have shrunk since 2012 due to the severe deterioration of the economy since 2012. But even assuming the worst economic conditions for 2013-2014, the distribution of classes in Venezuela today would not look as dismal as in the pre-2007 period.”

Now, this may be right. It could be that we tend to think of Venezuela as mostly poor, and the middle class as just a tiny sliver of the population … and that we’re wrong. It could be that Venezuela is middle class in its own, unique Venezuelan way – Quico has talked about the warped idea of the Venezuelan middle class on the blog here, and here, using the example of the typical family we would see in the Mavesa margarine commercials such as the one above. He has used this to make the point that Venezuela is decidedly not middle class, that what we think of the middle class is just a shrinking sliver of the population.

But are we wrong? Can Venezuela really be a middle class country?

Middle class brings to mind middle class values, ones that we certainly don’t have, at least not in their “liberal democracy” form. It conveys a certain sense of security in their socio-economic status – a somewhat stable middle class, not a paycheck-to-paycheck, one-SICAD-away-from-poverty economy. Can we really say Venezuela is a middle class country when it does so poorly on other social indicators (as Corrales rightly points out)?

I guess that, in the absence of hard evidence, we must cede the ground to the facts. Or as Javier says,

Yet even those who contend that the official rhetoric on poverty reduction is hyperbolic and official figures opaque must still recognize that, by world standards, Venezuela is a nation of mostly middle-class people.”

Read the rest of the piece here. It makes quite a few interesting points.

76 COMMENTS

  1. I am no economist or anything like that, but I think one just needs to give a formal definition of middle class and explain why one chooses said definition and go from there.

    There have been discussions about whether the $1, $2 dollar a day as a benchmark for extreme poverty is worth keeping, we know it’s different what you can grow in Mongolia, Mali or in lush Venezuela in 200 m2 of “conuco”.

    What is this supposed to be?
    *Middle class brings to mind middle class values, ones that we certainly don’t have, at least not in their “liberal democracy” form.
    What are “middle class values”? This sounds so fluffy to me. What about China’s middle class?
    Was Germany’s middle class during Hitler’s times not middle class?
    Can we talk about middle class in societies that are developing countries that haven’t even attained a capitalist stage?

    In Venezuela a school teacher cannot afford to rent a flat. In developed nations a school teacher would be middle class. Hell, as far as I see, in Chile a teacher would be middle class. Is he so in Venezuela? Only if he has inherited the house or is living with his parents, probably…and this situation has been so since the eighties (although now much more so).

    • Clearly social science. I read the post + the linked article in foreign policy, while I was correcting on a task to convert a positive number to a alphabetic representation like 0=A, 1=B, 25=Z, 26=BA and leftpad the thing to a String length 6 with ‘A’. I first got it wrong, because I used an algorithm from the internet without 0 where 1=A and you won’t get unique representation with the leftpadding of A. It was obvious to see, that my implementation was wrong.
      Same time I realized that defining middle class is much more complex and fuzzy. Social Science has to juggle with those complex and fuzzy concepts. We all know that. Which doesn’t mean that social science is futile. Blog posting and article are great.
      I guess great part of middle class voters of Hitler were motivated by a typical middle class ambition to participate in society by having a job. Of course they were absolutely wrong. So middle class is complex, fuzzy and not necessarily the Holy Grail of making things better.
      Chilean teachers often earn very little money for many hours. If you earn 1000 Euro a month, you are v.e.r.y lucky. Many make 500 Euros and they still haven’t paid pension scheme and health insurance.

      • Lemmy, I know little about Chile and I reckon they are very poor for German standards but based on the data I got from some people living in Chile, a Chilean teacher can afford to rent a tiny flat in Santiago.
        Two Venezuelan teachers together couldn’t pay for a month’s rent for a 45 m2 flat in a lower-middle class Venezuelan neighbourhood. Thus: a lot of people are living in more precarious conditions.
        Housing is a huge problem in Venezuela and if that issue is not solved and if we are so dependent on oil prices, I doubt we could be talking about a middle class…it’s more poor living off lottery money.
        In Germany there are loads of people who don’t own a house and do not want to but their capacity and, above all, the country’s long term capacity for giving them jobs gives them quite some security.

        I know “middle class” is a very complex phenomenon, but it seems to me as if it were precisely the economists who try to use very simplistic parameters to determine middle class belonging.

        • A Chilean teacher can afford to have his/her own flat, housing loans are cheap and relatively easy to obtain. Already in 2001 75% of Chileans were the owners of their house.

          • You see? I was being cautious but by any standards, Chileans are much better off than Venezuelans. Venezuelans were probably better off than Chileans 20 years ago.

    • According to the World Bank, countries are classified between low-middle income, middle income or upper middle income (Yes, according to the bedeviled World Bank Venezuela is an upper middle-income country…but the devil is in the details).
      Some people argue that in order to label a country as a middle class country its citizens must spend from 10$ to 100$ a day. The conundrum with gauging Venezuela´s economic performance vis-a-vis the rest of the world is with its currency board distortion. We may have a minimum wage of almost 500$ a month, but that´s only possible if you can go to the bank and swap those 3.000Bsf or something into greenbacks at the 6,30$/Bsf official exchange-rate. In terms of SICAD-i II…the picture looks gloomier still (60$ a month).

      • When you go to the supermarket, appliance/electronics store, car dealership, etc., and compare pricing to let’s say the US, one should probably use the black market rate. Therefore, to compare salaries one must also use the black market rate; which turns out to be a rather low salary for most people. If you take the $33,000, divide by let’s say 17 months (to account for vacation, year end bonuses, etc.) and multiply by the black market rate, one comes up with a monthly salary of ~BsF130,000/month. That seems rather high for a 10% of the population of the country.

        • But if you do that it will be also necessary to calculate with cadivi rate all price controlled items, including gas, milk, and harina pan. The right way of making that calculation will be to do a weighed average exchange rate based on peoples consumption and good luck make that calculation accurately.
          I think middle class “title” should be based on access to basic goods like home, transportation, food, and healthcare. Based on that, we are not a middle class country and we haven’t been since the late 80s.
          Also, you have to consider additional expenses like safety and security that many other countries doesn’t have to deal with. For example, I have to pay for a 24/7 guard and a alarmed/barb wired/electrified perimeter wall to protect our apartment building.

          • Agree with you Pepe. Maybe a better way for me is calculate what I can afford with my salary. I moved back to Venezuela 3 1/2 years ago. Got a place and had to buy a fridge right away. If I had to, I would not be able to replace it now, at least not with the same model. The same applies for a lot of items at home, so I’m taking extremely good care of all the stuff I own. I cannot even buy at the supermarket, unless for a very special occasion, a lot of the items I used to buy just a few years back. Cannot travel overseas any more; which I used to once a year. And the things I can afford, I cannot find. So, since I moved back I feel like I’ve gone from middle class to a rather low middle class …… and I don’t see things getting better any time soon.

  2. I’m aware this blog is the last place on the internet where I should bring my economic illiteracy, but I can’t help but ask what these definitions mean. I’m looking at the appendix and it defines “middle class” as anyone making between 300 and 1500 dollars a month, which already seems too broad and too arbitrary for a definition to be meaningful. But whatever, if that’s the standard then there’s nothing to do. My questions would be: what is the PPP exchange rate at which all of this is done? Where do they get the prices for the “basket of goods” that defines the PPP rate? I don’t think the same conversion factors should be used when determining the prices of, say, a kilo of Harina Pan Vs. a square meter of living space, though I don’t have any data to support this.

    I just don’t feel comfortable with the idea of using a single model to study the mechanics of so many different systems in which the conditions vary so wildly. If I took that kind of approach to engineering, I would fail miserably.

  3. Every day I realize I know nothing about my own country. Probably we think the middle class it’s only the upper middle class, ignoring the lower and the middle segments. I don’t know anymore….
    The only thing I’m sure is that Venezuela is not a working-class country: simply because of the systematic destruction of any industry that in the past employed a good part of the working population. An average Venezuelan nowadays is either a government employee or is employed by something related to the government. That was part of the initial castro-chavista plan of control the society via controlling their earnings. They have clearly done it very well.

  4. I agree with Kepler.

    Further, and more importantly, are we going to categorize class solely on the basis of income? I think it’d be a mistake to do so since class is also a social relation with respect to the state.

  5. Does class mean only the money we make? If so it is a relatively meaningless term except to manipulate people with meaningless statistics.

    It is not only a matter of values, but also a matter of living conditions and how money can be used and for what.

    Decent living conditions that are affordable, are a starter.A middle class income cannot pay for it in Venezuela, and even if it would, would people have the value of investing their income to pay for it?

    Without safe, clean, and uplifting neighborhoods with access to good services, libraries, recreational parks etc nobody can live a middle class life.

    Middle class has to be created both by government , and by the people who have the value of living middle class life.

    • Well, I don’t think that’s fair. Statistics are statistics, but GDP per capita is far from meaningless. It may not reflect everything you want it to – see the Social Progress Index – but there is some meaning in the indicator.

      • GDP per capita is statistics with a possible interpretation label.

        What would happen if the oil price goes down 20% and the government were to calculate GDP according to the actual dollar exchange rate or rates?

        Try to see the variation of GDP for Venezuela versus other countries.
        Take, for instance, Venezuela, Colombia, Chile, Norway, Brazil and Spain
        http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG

        Look at the negative periods we have…you know we had such a bad recession even though oil prices just tanked for a wee bit but were still at +-$64 much higher than in 1998.

        Is a poor rich when he has just won the lottery but all signs point to the fact he’s eating that up?
        Few L.A countries are in such a fragile state as Venezuela.

  6. There are three different definitions of what it means to be middle class , (1) by the quality of life people enjoy which is usually but not necessarily tied to their regular income , (2) by the way of life they practice and follow (which may not always be tied to their income) or in other words by their full or part time customs, and social behavior , and (3) by the values and type of mentality that informs their thinking .

    While we tend to see income as determinant of a persons or familys middle class status personal income or wealth varies sometimes gradually sometimes suddenly so that a person struggles to maintain a certain middle class life style while lacking the regular income it needs to sustain that life style in the long term . The reverse is also true peoples income sometimes rises for a limited period , not enough to substantially change its life style or its mentality or those of its children and yet income wise they are middle class .

    There are people who adopt or are inclined to adopting middle class values or mentality even where their income isn’t big enough but who struggle year after year to achieve the quality of life of the middle class and more over transfer it to their children .

    Also middle class values and customs permeate to people who economically don’t have the regular income ( emphasis on regular long term income) to be full fledged members of the middle class but who aspire to enter it and moreover who consider themselves middle class even if measured by their income they are not.

    I suspect that being middle class is not like being pregnant but instead a spectrum phenomena where people are middle class to different degrees , some fully middle class others sharing many but not all of the features of what define a middle class identity .

    There is a middle class archetype but ordinary people and familites don’t always fit the archetype model to a T . and there are some people who are not middle class even if their income for a couple of years allows them economically something close to a middle class quality of life.

    This is what the Chavista minister had in mind when he said that they wanted to improve the quality of life of people so that it would approach that of the typical middle class but they didn’t want them to become escualidos , i.e to adopt the mentality and values of the middle class.

    The effect of income on peoples way of life and way of thinking doesn’t usually happen in a year , it can take generations , at the same time same as there are born gentlemen or natures gentlemen , there are people who are middle class or have a vocation for being middle class which is independent of their current economic fortunes .

    The same comment can be made regarding the status of poor or marginal , there are not always sharp boundaries dividing people in different social categorization , but rather an element of flux and ambiguity which makes definition of class identities less crass that we tend to think.

    In that sense we are probably more middle class than the income numbers might suggest ..

  7. Interesting data. When they say things like the top ten earns $91 a day how do they make that number. Is that at official 6.3 Bs rate?

  8. As someone who lives in a neighbouring country of Venezuela, I can tell you that the amount of SUVs, the way the average person dress and the foreign stores and brands available in Venezuela have always impressed me. For me, Venezuela is a very very mismanaged rich country. The richest and also the most corrupt in South America by world standards too. The chavistas will eventually ruin the country for good, but it’s kind of hard to destroy the economies of countries such as Iran, UAE or Venezuela. It’s like trying to kill Magic Johnson with AIDS. It’s possible, but it demands time.

  9. Corrales offers a noteworthy perspective that changes somewhat the debate. For instance it posits the question Are there similarities between the protests in Ven and those recent ones we’ve seen in Brazil? Is chavismos role as defender of the poor a tenable position or rhetoric? Does chavismo enjoy significant support from the middle class Corrales refers to? And is the expansion of that middle class the result of chavismo or a general economic trend in Lat Am?

    • That’s an interesting point, one that we discussed at length in private. To me, the protests are more likely to occur in places and times when the difference between the *income* status (middle class, upper middle class, etc.) and the *social progress* status (in terms of governance, public goods, etc., as well as income) is large. That is why we see protests in Brazil’s wealthier cities, and not necessarily in its poorer ones, right? That is why we see protests in Caracas, but not in Tucupita. The gap between people’s status in terms of money and their status in terms of quality of life in our poorer areas is not as wide as it is in wealthier areas.

      Then again, we don’t have a clear answer for this yet.

      • We also saw/see protest in San Cristobal (a relatively wealthy city – Predominantly middle class?) but very little protest activity in a city like Coro (a less wealthy city? – I’m not sure on this one), for instance. This is likely largely to do with the nature of political polarization and less so with whether people feel excluded from or pushed out of a middle class. I think that in some ways we are unwilling to accept Corrales’s argument because it challenges a particular narrative about chavismo, and also about oil-rich Venezuela. The argument may in fact offer a sound challenge to the government’s blanket dismissal of the protesters as simply middle-class malcontents, as well a to those in the international community that view and portray chavismo as a savior of the poor. In light of the World Bank stats, some of the ‘poor’ have shifted into the middle class, and now the middle class is a majority group that is most vocal in the protests. This, of course does not change the fact that we have a deeply dysfunctional government…

  10. What is the exchange rate taking into account for the 93 dollars a day statistic? I really doubt that 10% percent of the population is making Bs. 2.145.000 a year and most things that the middle class aspires too (real state, cars, imported goods, private education) is calculated at the parallel exchange rate. I know that calculating the exchange rate at 65 is not precisely accurate, but the fx controls and distortions made it impossible to objectively asses the purchasing power of the middle class in the country

  11. In the Pioneer Valley of Western Mass., Javier Corrales teaches Political Science, a discipline that generally demands a lower amount of quantitative analysis, well below Economics (and at a par if one selects, like Mark Weisbrot, its more touchy-feely aspects) and a few notches above Sociology. I should know.

    Corrales applies good effort to define the various components of the middle class in Venezuela (see the hyperlink for “Appendix”) — not sure I agree. But for precision’s sake, he needs to correct the labels/colors used in that definition, in his Table 4 of said Appendix.

    Meanwhile, has anyone read Corrales’ co-authored “Dragon in the Tropics: Hugo Chávez and the Political Economy of Revolution”, its second edition now in progress?

  12. And what about all the middle class folks that have left the country as it was pointed a few blog posts ago? Is he taking that into account? Is anyone keeping the score on people leaving the country? Who are, of course, mostly middle class.

    • Oh yeah, brain drain is already taking its toll on the Venezuelan economy, but the situation will get much worse when the orphaned parents start retiring en masse and no substitutes will be available to replace them. GDP will be 100% oil.

  13. The guy might put a lot of stuff into the “values” part and trying to say that middle class is defined, as the chavistas say, by “wanting to have the living standards of the rich oligarchs but are too stupid to realize they won’t have the money for that”, that means, considering it as a mere way of thinking.
    Middle class is as much as it hurts to say it, measured in terms of actual income and living standards; to see if somebody actually belongs to middle class you should ask stuff like:
    * Can you afford a house or a car now on your own? Economic independence from the parents is often associated to “achieving these two goals”, if not, you’re considered a “mantenido”.
    * Can you afford the food basket (Canasta alimentaria)? Not the basic basket, which includes several other items than just food, I talk about the food one.
    * Do you spend about one quarter of your whole monthly income just to move to your work?
    It’s good to remember that the minimum wage in Venezuela is now merely 3250 Bolivars (Like 65$ using sicad II rate, cadivi’s 6,3 has been a fiction since the beginning of the infamous currency exchange control system) while the food basket costs about Bs. 9.986,67 (Like 200$, using the same sicad II rate)
    There are some other questions you could ask in the same vein, and they all fall in your living quality, if you have to live basically counting each cent to make the next bolivar because your paycheck never reachs until next fortnight, then congratulations! You’re not middle class, you’re poor class, and that’s like 70 or even 80% of Venezuela’s current population.

  14. Nagel, Mr. Corrales is using the Gross National Income for his calculations; i.e. “the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad.” I believe his mistake is using this number rather than the actual income generated by each working person in the country (you can get that data from household survey representative at the national level). This would lead to more credible results (and results more aligned with what we see on the streets).

      • These are the results for the 2010 household survey (Monthly income in Bs. by decile). The question is what exchange rate you use. At the official rate we have a huge middle class, but at the black market rate we may not have a middle class at all.

        decile2 | N sum mean
        ———+——————————
        1 | 16668 1.39e+07 831.5751
        2 | 14222 2.02e+07 1417.994
        3 | 14784 2.78e+07 1878.487
        4 | 11742 2.67e+07 2274.52
        5 | 16595 4.59e+07 2764.197
        6 | 12072 3.97e+07 3292.205
        7 | 14352 5.59e+07 3896.311
        8 | 14365 6.79e+07 4728.651
        9 | 14329 8.56e+07 5975.933
        10 | 14338 1.43e+08 9982.92
        ———+——————————
        Total | 143467 5.27e+08 3671.457

        • Interesting. So the top tenth of the population earned 9.900 BsF per month. What was that in official $s back then? I think it was at 4.3, so … it was about 76 US$ per day. If you adjust for PPP, you might get close to the $90 rate that the WB/Corrales find.

          So yes, this is pretty convincing evidence that the exchange rate you use affects the picture quite dramatically. Correct?

        • BTW, keep in mind that some people’s incomes are tied to inflation and to the dollar. (Carniceros come to mind, right?) So inflation might devalue people’s salaries, but not everyone’s.

          • People that own businesses may adjust prices to overcome the effects of inflation, etc. and in the process adjust their salaries. But for every business owner, there are several employees that may only make minimum wage. The country has large number of public employee. Unless they make minimum wage or are “enchufados”, their salaries remain flat for several years. And then they only get a ~40-50% increase that doesn’t come even close to compensate for inflation.

            As far as I know, salaries tied to the dollar are only those of big executives in big firms, but I could be wrong.

          • What percentage, Juan? Any guess? 50%? 10%? 1%? Does this include the butchers who work in humble areas around Venezuela? (the great majority)

          • Mmm… No. Not people’s incomes. Some prices are tied to the dollar, yes. Like imported Laptops, cellphones, etc. The income of merchants of imported goods is a function of price and volume. The loss of purchasing power means clients are either buying less quantity than before or that their buying cheaper alternatives which translates in reduced revenues, even if the per-item profit margin remains constant.

            For instance, when I was in elementary school, in a lower-middle-class to medium-middle-class household, my mom bought me black reebok shoes for school, white reebok shoes for physical education and classic brown timberland shoes for the afternoon and the weekends, nowadays either of those shoes sells for at least VEF 5,000 and maybe up to to 7,000 a pair. That’s VEF 15,000 – 21,000 in kid’s shoes a.k.a 3 to 7 minimum wages, or a from a 1 monthly wage of fresh-out-of-college engineer to 1 monthly wage of a senior engineer . So now, you see kids in school wearing RS-21 and New Balance, which are much cheaper, and converse knock-offs for the afternoon, I would even go farther and say that I suspect people are buying less pair of shoes now than 15 years ago. Thus I doubt shoe store owners are have kept their revenue steady when converted to USD in these 15 years.

            Another factor, besides loss of purchasing power, is price controls, which effectively prevent lots of business owners to tie their prices to inflation or the dollar. That means that over time, raises on the minimum wage, services, rent and other costs have reduced the overall profit margin since prices haven’t been able to keep up. Further compounding the problem, price controls downstream affect the supply chain, causing some business owners to forego income for lack of raw materials to produce or merchandise to sell,despite having enough cash to purchase those scarce items. The typical Venezuelan butcher is having trouble getting enough meat o meet demand and has also struggled with prices that don’t allow them to cover their fixed costs with the inventories their providers send them.

            The most prominent income that IS tied to the dollar is Chavismo’s, since they get to sell PDVSA’s oil and keep the dollars, unlike every other exporter in the land. Some other lucky people, are getting paid in USD in foreign accounts (higher ups in multinationals, some VIP contractors, foreign embassy personnel, multilateral organizations employees, and other few exceptions).

  15. I tend to agree with bill bass. Middle class is not only a function of income. In Venezuela there is a “middle class” mindset that is linked to the ideal of consuming (objects, ideas, services). This mindset expanded during the Venezuela Saudita era (first CAP), and continued during the Chavez era. Actually Chavez was a very good salesman of the middle class ideal. He promoted consumption of all kind of “cachivaches” (I remember many cadenas where he was promoting the Chinese appliances, in a very Renny Ottolina’s style). That’s one of the many contradictions of the “Socialismo del siglo XXI”. The foundation of the regime is the oil money that prompted consumption (and certainly corruption), and infused the aspirational middle class mindset. That’s one of the barriers that have prevented the development of a totally Cuban like model (the old one, not the “new” one that is looking for some compromises with the market economy). La semilla del fin de este régimen está, de alguna manera, en la mentalidad consumista (clase media) de la gran mayoría de los venezolanos. Esa será su perdición.

    • “La semilla del fin de este régimen está, de alguna manera, en la mentalidad consumista (clase media) de la gran mayoría de los venezolanos. Esa será su perdición.”

      I believe this to be absolutely true. The self-described “revolution” part of chavismo is really just a descriptor for autocratic rule within a fundamentally consumerist mindset.

  16. Juan, after revising Javier Corrales data, I didn’t see the source of the exchange rates used for each of the year posted. Hence, I am assuming it’s the Banco Central de Venezuela’s official exchange rate of Bs per US$. If this is the correct then you know the magic trick, right? If you use the stated official exchange rate as listed today at 6.2842 per1 US$ for today, and failing to use the other official (more realistic) SICAD’s exchange rate of BsF 49,48 per 1 US$, then you have the colossal distortion of all these data of about 687% or a 7 to 1 difference. Now you make your real GNI numbers please…

    • Perhaps, but since he’s using WB indicators, and they are taking into account PPP, then … shouldn’t that be accounted for? I dunno, that was the source of my skepticism as well, but I’m not satisfied with either answer.

      • Juan, NO. Venezuela’s PPP is calculated against a fixed currency value (official exchange rate) applied to the cost, in local currency, for different items or a basket of items or services, but at the end the key to fairly and reasonably calculate the “real” PPP adjusted value will be applying the “real” free market exchange rate, which is NOT possible in Venezuela unless you apply BCV’s SICAD’s rates. Otherwise, the value showed in the PPP will be greatly distorted, as it happening in Javier’s results. Hence, I stick to my statement that Javier’s data is colossally wrong because that single fact.

  17. I looked at the Social Progress Index to see how Venezuela ranked among the 22 countries of Latin America & the Caribbean. I did not rank every index. The results:

    Social Progress Index 14
    Basic Human Needs 18
    Foundations of Wellbeing 7
    Opportunity 19
    Nutrition and Basic Medical Care 7
    Water and Sanitation 13
    Shelter 17
    Personal Safety 22
    Access to Basic Knowledge 12
    Access to Information and Communications 9
    Health and Wellness 16
    Ecosystem Sustainability 6
    Personal Rights 21
    Personal Freedom and Choice 20
    Tolerance and Inclusion 10
    Access to Advanced Education 13
    Undernourishment (% of pop) 4
    Depth of food deficit (calories/undernourished person) 3
    Maternal mortality rate (deaths/100,000 live births) 11
    Stillbirth rate (deaths/1,000 live births) 13
    Child mortality rate (deaths/1,000 live births) 7
    Deaths from infectious diseases (deaths/100,000) 7
    Access to piped water (% of pop) 10
    Rural vs urban access to improved water source (absolute difference) 17
    Access to improved sanitation facilities (% of pop) 8
    Availability of affordable housing (% satisfied) 9
    Access to electricity (% of pop) 100%
    Quality of electricity supply (1=low; 7=high) 21 [Cuba not ranked]
    Adult literacy rate (% of pop aged 15+) 7
    Primary school enrollment (% of children) 14
    Lower secondary school enrollment (% of children) 13
    Upper secondary school enrollment (% of children) 11
    Mobile telephone subscriptions (subscriptions/100 people) 12
    Internet users (% of pop) 11
    Press Freedom Index (0=most free; 100=least free) 17
    Life expectancy (years) 9
    Political rights (1=full rights; 7=no rights) 5- only Cuba lower
    Freedom of speech (0=low; 2=high) 0- also Cuba and Guyana
    Freedom of assembly/association (0=low; 2=high) 1 -one of 8 + two @ 0
    Freedom of movement (0=low; 4=high) 4 -one of 16
    Private property rights (0=none; 100=full) 5 last. Below Cuba?
    Corruption (0=high; 100=low) 22-worst
    Community safety net (0=low; 100=high) top 3 with Paraguay and Cuba

    In 2012, Venezuela ranked 6th of 21 LAC countries in GDP per capita, PPP (constant 2005 international $)– Argentina was not included. If Argentina were ranked, Venezuela might slip to 7th.
    Looking at these rankings, we once more reach the conclusion that Venezuela isn’t getting good “bang for the buck” in translating its oil income into “social progress.”
    The indexes on Press Freedom, Political rights, etc., are not a surprise either, though some PSF might be surprised.

    Given Rural vs urban access to improved water source (absolute difference) 17, and Chavismo’s strength in the countryside, this might be something to harp on.

    World Development Indicators Databank (World Bank)

    • Exactly. That was the main point I tried to make with Javier. I’m glad he included a reference to this in his article.

    • We rank 67th according to that Social Progress Index
      According to World Bank data, Venezuela ranks 50th in GDP per capita, PPP (constant 2005 international $) This does not suggest good “social progress” bang for the petrobuck: 50th in per capita income, 67th Social Progress Index,

      Within Latin America& the Caribbean, Venezuela ranks 6th in GDP per capita, PPP (constant 2005 international $)– but Argentina is not ranked. If Argentina were ranked, Venezuela might be 7th, Venezuela ranks 14th out of 22 in Latin America & the Caribbean in the Social Progress Index. Once again, this does not suggest good “social progress” bang for the petrobuck.

      [Given the funny money aspects of the multiple exchange rates used in Venezuela, using an index with PPP- purchasing power parity- is the best way to go, however imperfect it may be.Or least bad.]
      World Development Indicators Databank (World Bank)

  18. It’s interesting that most of the reactions are similar to mine – the data says we’re middle class, but it certainly doesn’t feel that way. There has to be a way of reconciling the two things, but we still don’t have it. Perhaps we’re wrong. Perhaps the data is wrong.

    • We’ve been 15 years in this kind of situation. Data says one thing, then you put a step out of your house and reality says another.

        • Because quality always trumps quantity , and surveys on subjective factors are too subjective to indicate anything objectively quantifiable.So data has a limited use.

    • Middle class is a concept born in the 50s, and different to petty bourgeoisie concept (http://caracaschronicles.com/2005/07/25/the-hidden-middle-class/). Piketty in his Capital in the Twenty-First Century shows that wealth (capital, assets, land) is far unequal than income distribution.

      Before WWI, the usual wealth distribution in West Europe and USA was the poorer 90% of population having 10% of wealth, the 10% wealthiest having 90% of wealth.
      After 1945 (after bank crisis, world wars, capital destruction and high taxes), the wealth distribution changed: 50% of the population in average western country is still having nothing (5% of national wealth), 10% is now having 60% of wealth, but now the middle 40% is having around 35% of wealth. I think that is a better definition of middle class: the new class of small owners appeared during the second half of XX century, regardless of (even if correlated to) education, values or anything else. Looking at wealth instead of income is probably more realiable and acurate in Venezuelan context.

      What is the wealth distribution in Venezuela? Is this similar to Belle Epoque wealth distribution?
      Since real state takes a big share in the wealth of the middle class, some elements let think that we are in a mixed configuration: lot of people in barrios own their houses, lot of people have mortgages with negative interets rates, etc.

  19. The problem seems to be in definitions. Clearly, income alone is too simplistic a measure for most social complexities. One reason it is used so generally used to define critical poverty is because when measuring survival needs (e.g., nutritionally balanced minimal diet), one can leave out most social complexities, so income becomes a very valid and practical measure.

    Just going up one level to non critical poverty, the social complexities already makes defining so difficult that definitions start getting pulled out of thin air. For example, in Venezuela the definition for non critical poverty is simply “double the income of critical poverty income”. Therefore, defining middle class by income alone would not come close to describing the socio-economic complexities of Venezuela’s middle class, especially with the tsunami of changes and the economic messes taking place.

    Given that at one end of the class spectrum the definition by income is valid, how correlated are the demands of the bulk of Venezuelans to income increases? One could deduce that the higher that correlation, the more the demands are about poverty, while the lower the correlation, the more they are about comfort, or luxury, or principle.

    The way I see it, the demands tend to be highly correlated to income, implying that they belong to the lower side of the class median. They mostly talk about culturally required grocery store staples, about health, about housing, and mostly safety. These are all low on Maslow’s pyramid. The government is failing to see that these are not “pataletas de ricos”. Just because those below the poverty income line are being kept appeased does not imply that discontent is not about lower classes.

    So, to me, no, Venezuela is not a middle class country.

  20. IMO a good proxy indicator is net immigration. During the post war period and specially in 50’s, 60’s and 70’s Venezuela took in net numbers of qualified artisans, and labourers, First Europeans and middle eastern later Colombians Peruvians Argentinian Chileans etc…
    A good mix over all. Since the 80’s the net immigration as plateau and began to reverse.
    The last 20 years, since the mid 90’s crime induced waves, to the Chavista period of political and economical influenced outflows to the coming salvense quien pueda debacle,… GDP producing peoples are an important part of the equation.

    IMO any analysis of venezuela economy and society shoud normalize for Oil income ( f (taxes, prices, and volumes, and uses)) and separately the non o& gas sectors.

    Only 100 K people are directly employed in this industry while >80% of the national treasury comes from its revenues.

    > 90 % of the productive population and population at large are outsiders and their income levels per capita, as a function of the non O&G income is significant different.

    Another major distortion is demographics. Over 50 % of the Venezuelan population has been historical under 25, so not necessarily in the productive population age brackets.

    I notices a comment before about demographic shock of orphaned parents retiring ages approaching. Good one. Add to that the deficient elementary and high school education chavismo has been promoting for the last 15 yrs (the complete schooling ages pipeline cycle) and what you will have in ten years if this regime is not fundamentally challenged and neutralized, is a more dependant society on government/ partido/ state crumbs….

    La tormenta perfecta.

  21. The income is important in that there is an income window within which middle class style of life can be pursued more or less succesfully in a lasting fashion but it certainly doens tell the whole story of what being middle class is basically about . there is a middle class ethos which ultimately can lead moneyless people to economically achieve solid middle class status if given the opportunity and people who lacking the ethos will never achieve it even if contingently given the income to achieve that status

    Example . in the 50’s we saw a huge influx of european inmigrants who arrived with very little money , which in their countries would have been considered poor but who came endowed with a work ethic and ambition and a srong sense of commitement to improving the lives of their children and families and who after years of effort attained for themselves and for their children a firm economic middle class status .

    This ethos was there even if they didnt originally have the income , it wasnt the income that made them middle class it was the ethos which allowed them to acquiere the means to live a middle class life.

    From personal experience and observation Ive also seen again and again how people of very humble origins had something about them , a sense of commitment ,and discipline and ambition and attachment to family values , that set then apart from those arround them , even from people in their families and who through their own effort with a bit of help from external circumstances managed to conquer for themselves a middle class style of life .

    This story is repeated again with many inmmigrants from other latin american countries like colombia and dominican republic and peru and ecuador , who arrived poor but worked hard to achieve a better life and achieved it even while lots of locals couldnt be bothered to do much to improve their lives even while being the beneficiaries of munificent income in reward of their political loyalties and clientelar attachments .

    At the same time there are people who lead middle class lives in terms of the things they like to consumme but who othewise lack many of the features of a middle class ethos , primary is the concern for the future , for building a future both for themselves and most importantly for their children that is a clear improvement from that which their parents had .

    If we measure the middle class status of people solely or primarily by their current level of income and consumption of goods and services we probably are not getting a full picture of their true social and anthropological characterization . We must also look at the origin history and sustainability of that income throughout time ( not a years photo but the film of the whole income stream) and the multigenerational reach of its operation .

    Venezuela because of the way its ample oil income has allowed for a lot of social mobility during past decades has a middle class which sometimes carries in its cultural genes a lot of marginal features which show up in things like its rampant consumerism and which give our middle class ethos a character all of its own .!!

    In common Venezuelan parlance you describe some one as ‘muerto de hambre’ then you are referring to a ‘recien vestido’ someone who having known want is extravagant and inmoderate in the way it consummes things as if ‘there is no tomorrow’ , that is typical of people who have risen very rapidly from poverty to relative opulence and havent yet learned the middle class value of temperance of self restrain. The avid uncontrolled appetite of the recently famished is probably something which all Venezuelans poor and middle class share . The origin of the famous monicker we were given in Miami for may years ´los ta barato dame dos ´.!!

  22. I do not think that we should make a definition of middle class using numbers and indicators so easily.

    A friend of mine once tell me the following:

    “The government decides to increase the middle class by subsidizing things that middle class people have. If middle class people go to college and own their home, then it follows that if more people go to college and have houses, the middle class will be larger.

    But owning a home and go to college are not a reason to be called “middle class”, those things are a consequence of having the kind of behavior (self-discipline, defer gratification, etc..) that facilitate entering and staying in the middle class.

    Subsidizing indicators does not produces behaviors, in any case, it devalues those behaviors. “

  23. Nagel,

    I’ve the feeling that the data can confirm an increasing size of the “middle classes” in Venezuela, using the WB approach, but Javier’s calculations are simply not right: You simply can’t mpose the GNI per capita over the decile distribution of ECLAC, because the later comes from the household surveys, which is by nature totally different in nature and levels from the GNI.

    The GNI includes the income of the capital factor, the HHS are mostly labor income.

  24. How can anyone calling himself “professor” “just” publish an article in a prestigious Review using data from 2012, which only reflect a terribly over-valued Govt.-controlled local currency, and not the current local currency becoming increasingly-worthless in real terms. Even the touts at BOA estimate a 2015 Bs./$ at 45, assuming a unified exchange rate. Venezuela is a POOR country in GNI/capita terms, and those protesting are in the (once long-ago middle class) upper class of the poor. And as for “social progress”, anyone living in Venezuela can attest to how poor the country is in terms of access to adequate electricity/water/health care/public education/personal security/impartial judiciary/etc. etc.

  25. Beside the conceptual criticism on mixing up national and household’s income, I have to say that for practical reasons, working income distribution in deciles, as in the average income of each decil, can led to a misrepresentation and error.

    Under Javier’s methodology, for example, an infinitesimal change in average income of a decil can make a very sizable chunk of 10% of population either poor or not poor; those changes would be completely artificial and does not make sense conceptually. BTW, under official INE data the national poverty rate in 2012 was 24% of population, I know that that´s using a different poverty line, but is good for reference.

    The proper way to do the analysis is by inspecting in depth the series of Venezuelan household surveys from 1990 to 2012, nothing too fancy, just establishing thresholds and counting people

  26. I have been following and tend to agree on many of the point. First of all the distortions of the exchange rate. However, having a very similar perspective than Juan, I think we see middle class in a very narrow sense. It was very recently pointed out by a friend who lives abroad and comes from upper middle class rural Venezuela, that income numbers say very little. For example, most of her “pocket money” came from baking cakes with her sisters, they all made a couple of minimum wages in a month and never really worked or needed to work. But she got the idea from the lady that came to clean her house who made a better living of cooking food, but liked the “security” of a monthly income.

    What also got me thinking, so many people who have “undeclared” incomes… people in Venezuela are resourceful. Women selling underwear, beauty products, shoes… or as an article I read in prodavinci (can;t find the reference right now), where a middle class working professional struggling with an 8k salary is surprised to know a “camionetica” driver makes much, much more than her. So does a moto-taxi, messenger and so on…

    The opposite side of the coin is a retired aunt with a PhD that lives off helping students with their thesis because her pension from the fire department is minimum wage. She is struggling every month, but she still considers herself middle class.

    What is clear to me is that, at least in the cities, very few people rely on minimun wage; and that income supplements are quite prevalent in “lower classes”, probably pulling them out into “lower middle class” without ever even thinking of themselves as such.

  27. What is this nonsense?
    Under this logic then you could say Venezuela is the richest country in the world,and the happiest too.

  28. The problem is the FX rate you’re using.
    Don’t be fooled with all the SICAD I-II-III Cadivi, etc. rethoric. You cannot use 6.3 or for that matter 65 because most people does not have acess to US$ at that rate. Therefore, you must use 80Bs./US$.
    At that rate, minimum wage in Venezuela is 40 bucks. Average salary is 112US$.
    That is not middle class.

  29. I think that many of the comments on this thread miss the point raised by Juan, that ‘middle class’ is not reducible to income level, but is also a factor of ‘distinction’ in Bourdieu’s terms. In Australia people used to talk about ‘cashed up bogans’, basically working class people working on mines and making oodles of money… but acting like working class ‘bogans’. I think what is occurring in Venezuela is an alternative form of modernity where what is middle class looks and feels very different to Chile or Mexico or Australia. When I have visited Venezuela, in comparison to anywhere else I have been in the Americas, there appear to be less middle class to my eyes trained elsehwere, Venezuela appears poorer than its economics belie.

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