Social Democratic Models of Development: Can Social Equality Make Whole Nations Richer? Evidence from the Brazil and the Global South Post 1989

This paper draws from the social democratic models of Sydney and Beatrice Webb and Dieter Senghaas to argue that social equality can increase the rate of economic development. Most sociologists study the relationship between economic development and stratification. It is less common to study reverse causation; however the gutting of the income of the popular classes and the concentration of income in elite hands can significantly slow the rate of economic growth by reducing consumption, lowering overall demand, reducing the rate of new firm formation and retarding the rate of technological growth.

We address the question of the relationship between economic inequality and social transformation as measured by development by using what would be for sociologists an unusual statistical methodology. We consider the Leontieff input-output matrices that have been calculated for nations in the Global South since 1989. These measure the interindustry transfers of income that come from sales between vendors and suppliers - and are used to measure the multiplier effects of different industries. One little-known property of such matrices is that the contribution of wages to growth is often measured. The magnitudes of wage effects are frequently un-reported in the economics literature. Sociologists ignore these analyses altogether.

The data allow for a calculation of the effect of raising wages on overall development and allow apples-to-apples comparisons of how improving social welfare would affect the economy as compared to stimulating the industries that traditionally receive government stimulation such as automobiles, steel or computers. Higher wages increase the purchases of consumer goods which leads to all sorts of backward linkages to the industries that supply the raw materials and equipment that produce consumer goods.

Human Welfare is "an industry" that can produce real growth.