Social Change, Industrialization, and the Service Economy in São Paulo, 1950-2020
Francisco Vidal Luna and Herbert S. Klein



This represents the third volume of our economic and social history of the state of São Paulo, which begins in the middle of the eighteenth century and extends to the present day. Although São Paulo underwent major transformations until the middle of the nineteenth century, at that point it was still a province without prominence in the empire, with small urban centers and with little connection to international markets. Its population was composed of a mixture of poor whites, Indians, caboclos (mestizos), Africans, and Afro-Brazilians, and its agriculture supplied mainly local and regional markets. Despite the fertility of its lands, its lack of an adequate infrastructure meant that most land remained unexploited and it exported relatively few products. Its capital city was small, and even in the early stage of coffee production it was a secondary producer until the second half of the nineteenth century.

Coffee, virgin lands, railways, and slave and free immigrant workers made it possible to transform this relatively backward and modest province into a power of the empire and the republic. With the new entrepreneurial elite of coffee growers that emerged in the second half of the nineteenth century, local agriculture finally became competitive in national and international markets. Initially based on slave labor, the modern coffee plantations were able to shift to free wage labor in the 1880s with the wealth generated from the slave period, allowing the planters to attract millions of foreign and Brazilian immigrants, which in turn gave rise to a modern economy, based on wage labor. The local elite invested the profits obtained from coffee exports in domestic and foreign trade, in railroad construction, in financial institutions, and even in industry. Free wage workers, in turn, created an expanded market for food, clothing, and other consumer products, increasingly supplied by local production. The population grew rapidly; the railroad penetrated all regions of the state, and coffee expanded along with the railroads, so that by the beginning of the twentieth century, São Paulo had become one of the most dynamic regions of the Brazilian economy.

The economic and social transformations that took place in São Paulo were facilitated and supported by the evolution of an administrative structure and by a state government determined to invest in basic infrastructure. The São Paulo elite, whose influence during the empire had been restricted to a limited provincial government, strove so vigorously for autonomy that they eventually took control of the federal government during the Old Republic period and forged a powerful state government. Throughout the twentieth century, the state of São Paulo led the nation in such fundamental areas as health, education, science, and technology, in addition to being a model of administrative organization by the country’s standards. It educated more people, had the best water and sanitation systems, and owned most of the nation’s highways and the best secondary roads in the country.

All these changes were made possible by the reorganization of state finances after 1889. Under the new republic, the São Paulo government reorganized and expanded, with new and extensive fiscal and financial powers. The objective of this government was to forge a state that had a high degree of autonomy and would sustain and expand the economy and society. These objectives demanded increasing resources, financed by the growing tax revenues and by large loans obtained in the national and international credit markets.

While promoting growth, the São Paulo government in the twentieth century also actively intervened in the coffee economy and, finally, controlled production, buying stocks, and limited the supply in ports to protect coffee growers in times of international crises. It also had to deal with other economic, political, and fiscal crises. Among them were the financial bubble known as the encilhamento, the two world wars, periodic overproduction in the coffee market, and the economic depression that began in 1929 and which led to a major transformation in the structure of coffee production and forced the state to finally resort to federal government support. Although the Vargas revolution in 1930 reduced the power of the state government, even with less power and fewer resources the state was still able to provide basic economic support for the increasingly industrialized and complex São Paulo economy.

Another aspect of this dynamic growth of the state of São Paulo was the growth of the city of São Paulo, which went from a small town of 20,000 inhabitants in 1850 to a population of 2 million by 1950 and began to challenge the dominance of the federal capital, Rio de Janeiro. But it was in the period after 1950 that the city emerged as one of the largest metropolitan centers in the world. While the rest of the state progressively urbanized in this period, and its agriculture dramatically diversified, it was the capital city that would become a world metropolis with influence far beyond the borders of the state. Smaller than Rio, Mexico City, or even Buenos Aires in 1950, by 2020 it had become the leading urban center in Latin America and one of the largest cities in the world, with its influence spreading far beyond the borders of the country.

Until the middle decades of the twentieth century, coffee dominated agriculture and the exports of the state. But already by 1950, the slow evolution of a more complex agricultural and industrial economy had begun in the state. Even when coffee dominated exports, foodstuffs and commercial crops such as cotton were an important part of the agricultural sector. The state’s agriculture led the nation in the use of machinery and fertilizers, and reached a new level of productivity in various traditional crops. But only after 1950 did the state become a modern producer of meat, sugar, oranges, and soybeans, with levels of productivity that allowed these products to replace coffee as the main agricultural exports of the state by the end of the twentieth century. The agricultural revolution that placed Brazil among the great countries of world agribusiness only happened in the last quarter of the century, and especially from the 1990s, with the opening of the economy and the impact of government-sponsored research in agriculture and livestock. There was also increasing productivity in traditional food products such as rice, corn, and beans—the basis of the Paulista food basket—that allowed local agriculture to support the ever growing urban population of the state. It was also local production that provided the raw material for the food industries that developed into an increasingly important part of the thriving manufacturing sector. Similarly, it was cotton produced in the state that supplied most of the raw material for the important São Paulo textile industry. By the late 1940s the frontier lands of the state had been mostly settled, and the middle decades of the century were therefore a transition period in which local agriculture stopped expanding through the exploration of virgin lands and started to depend on the systematic use of machines and fertilizers. From this base, Paulista agriculture in the second half of the twentieth century would emerge as the national leader in agricultural diversification. Not only were new products developed in agriculture but there was even a major revival of such traditional products as sugar along with a new milling and refining industry.

It was also in the second half of the twentieth century that the bases for the explosive growth of the São Paulo industry were consolidated, which transformed São Paulo from a secondary production center into the main industrial state of the country. From the end of the nineteenth century, São Paulo industry, which started mainly with the production of textiles and the processing of foodstuffs, grew at an impressive rate. Several factors explain this advance: the introduction of free labor (especially of European immigrants who immigrated to Brazil, the majority of whom arrived in this state), with their growing purchasing power in comparison with slave workers; the availability of resources thanks to coffee exports; the willingness of large coffee farmers to invest in urban and industrial projects; a growing agro-industrial integration; and a series of external shocks that limited international trade. This set of factors, to a greater or lesser extent, stimulated local production and allowed the consolidation of an industrial process even before the introduction of effective policies to protect industry, which only began in the second half of the twentieth century. When protectionist policies were implemented by the federal government, São Paulo had already consolidated its industry, which was based largely on local raw materials, and production expanded to meet regional and national demand.

But if the first volume dealt with slavery in São Paulo and the second volume focused on the transition from slave to free wage labor and the consolidation of the state as the main coffee-producing center in Brazil and the world, this third volume deals with the accelerated industrialization of the state as well as its growth into the dominant center of services in the nation. Brazil from the 1950s to the 1980s built one of the most advanced and integrated industrial structures among the so-called developing countries. This process was initially concentrated almost completely in the state of São Paulo, and more precisely in the metropolitan region of São Paulo, mainly in the area known as ABC Paulista. This metropolitan region showed rapid economic and population growth, centered on industrial expansion, which shaped the urban fabric.

But from the 1980s there began a process of decentralization of industry to other states, reducing the relative importance of the state in the country’s industrial product. At the same time, there was a decentralization of industry within the state of São Paulo as industry left the capital for interior industrial centers, with a rapid loss of the relative importance of industry in the metropolitan region. Though the state was still the leading industrial state in the nation in 2020, its relative importance within Brazil declined. This in turn led to a slowing of internal migration as the local labor market matured and no longer provided expanding occupational opportunities. The rise of new industrial centers within the state was accompanied by the rapid growth of new metropolitan centers that competed with the capital and São Paulo metropolitan area and led to a relative decline in those latter two areas’ industrial prominence within the state.

In turn the capital transformed itself from an industrial city to a primarily service city in the current century. It became the financial capital of the country as well as the headquarters of most of the national and international companies operating in Brazil. Its health and educational services were to become the most important in the nation. In this period it saw major growth in public and private universities, which quickly became among the most advanced in Latin America. This educational base, the most advanced in Brazil, in turn educated an ever larger class of liberal professionals, which quickly filled the expanding service workforce. So rapidly did the capital grow in income and importance that its influence soon spread well beyond the borders of Brazil. In its cultural institutions, its universities, its banking, and its corporate importance, the municipality of São Paulo with its 12 million people became a world metropolis. It is the largest city in the hemisphere, one of the largest in the world, and the single most important city in Latin America, attracting a large entrepreneurial class of natives and foreigners. It was in the sixty years after 1950 that São Paulo emerged as a global city, with all its splendor as well as its frailties and problems.

Given the rapidity of its growth from 2 million to 12 million in this period, the capital and its metropolitan region of satellite cities still exhibit problems of distribution, housing, and governance. The rise of an educated middle class and the decline of the premium of education as more well-educated persons entered the workforce seems to have had only a modest impact on overall income distribution, as both the state and the nation remained one of the most unequal societies in the world. As migration and growth slowed, the state and above all its capital city still were left with major problems regarding how to house the migrants who had come from all over Brazil. Though the capital built avenues, subways, and schools, it could not increase the housing stock and services at a rate equal to the size of the migration. The result was the expansion of illegal and unsafe settlements known as favelas. Favelas developed in the capital and its metropolitan region. They also appeared in almost all of the interior and littoral cities, with Santos having the largest favela on stilts in Brazil, and Campinas and other important urban centers of the state also containing these illegal and poorly built slums. Although electricity was brought into most of the favelas, sanitation facilities lagged and the transport system remained problematic. For the size of its working population, the metropolitan area of the capital had insufficient subway lines and an insufficient bus network, such that moving people from home to work became ever more difficult. Thus despite all the positive changes and the systematic growth of state and federal government funding, the state of São Paulo and its cities still had serious problems providing for all its citizens even as late as 2020.

This study thus covers one of the most dynamic periods in the history of the state of São Paulo. It was in this period that the state and its capital became the unqualified leaders of the nation in industry, agriculture, and services. It was the period for which one can say that São Paulo really did become the locomotive of the train of Brazil. With all its problems, the city has modernized its infrastructure, developed a dynamic professional class, and created a modern service industry. It is this transformation that we will examine in this study

In order to assess the general transformations that occurred in the state of São Paulo in the seventy years studied in this volume, we begin by drawing a general picture of the state in the year of 1950. We then go on to examine industrial growth and relative decline and how industry has changed in the capital and the state. We next examine the very important changes in the state agricultural sector in this period, which saw the state not only maintain its lead as Brazil’s richest agricultural producer but also diversify into a host of new crops as coffee moved into a position of lesser importance. Finally we examine the rise of services and trade and how they came to dominate the capital in this period, replacing the previously dominant industrial sector.

We then explore the dramatic demographic and social changes in the state in the next several chapters as the state became more urbanized, with a better-educated population, and passed through the modern demographic transition, which led to low birth rates, smaller families, and higher rates of education and labor participation for women. It also led to a change in female roles in all parts of Paulista society, from marriage and the family to work and education. There was also a very significant increase in life expectancy, and this combined with lower fertility resulted in an increasingly aged population in this period, as São Paulo and its southern neighboring states led the nation in this demographic and social transformation.

The section on social change also explores the variations in social mobility that occurred both in the early stages of industrialization as well as in what might be defined as the post-industrial phase of the state’s development. Clearly the state has moved away from a very fluid system of mobility as occupations expanded dramatically and toward a more traditional circular pattern of movement both above and below parents’ initial positions in the socioeconomic class system. We also deal with the question of race, a fundamental issue in any former American slave society. While this is a question of importance to all Brazilian society, it became a major theme in São Paulo as the migration of native-born Brazilians from other regions to the capital and the state created an ever more racially mixed society. We will try to assess how the rise of an industrialized and unionized labor force and a professional middle class influenced the role of Blacks and Browns in Paulista society.

Finally, we explore how the capital and its metropolitan area developed in this period and came to distinguish itself from the rest of the state despite the increasing urbanization of the state population. Our study ends with the transformations and problems created with the growth of the capital and its metropolitan region into a world metropolis.