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Brazil: Neo-Liberalism, crises and electoral
politics
James Petras
Introduction
Brazil is the ninth biggest economy
in the world, geographically almost as large as the USA with nearly 200 million
people and in the deepest economic crises in 70 years. Like South Korea, Brazil
is an industrialized country with 75% of the people living in cities. Brazil has
the ignominious distinction of having the worst income and land inequalities in
the world. Today its unemployment and underemployment rate is nearly 50% and its
economy is in deep crises its per capita income has declined for five of the
last six years. To understand the political economy of the contemporary crises
it is useful to briefly survey recent Brazilian history, then examine the
neo-liberal regression of the past 8 years as a context for discussing the
current crises, the Presidential elections of 2002, the right turn of the
Workers Party and the perspectives for the workers and peasant
movement.
Historical
Survey
In 1930 the liberal
export strategy collapsed, as the demand for agricultural products (coffee,
rubber, etc.) declined precipitously. Beginning in the mid- 1930s Brazil under
President Vargas embarked on a nationalist-statist- industrialization strategy
similar to South Korea's in the 1960s. Between 1940- 1980 Brazil's GNP grew
between 6% and 9% each decade. Protectionism and direct state investment led to
a diversified industrial sector (textiles, steel, etc.) and the growth of a
significant working class. The urban working class was organized in corporatist
state controlled trade unions in competition with the class based trade unions.
The government provided social welfare and protective labor legislation on the
one hand and repressive measures against class based trade unions. In the early
1960s, the alliance between populist labor, the national bourgeois and the state
went into crises: labor unions demanded greater independence and wages, peasants
occupied land, and the Marxist left was gaining influence.
The military backed by
Washington overthrew the elected government in 1964 and the military ruled with
an iron fist until 1985.
The new economic strategy
of the military was essentially based on an alliance between the state, the
multi-nationals and the Brazilian big bourgeoisie. The shift was from producing
for the domestic market to exports; labor's share of national income declined
even as the size of the working class increased. State enterprises were 50% of
the 100 largest enterprises in Brazil. By the end of the 1970s rapid growth of
the automobile and metal industries created a "new working class" which began to
organize independently of the state under the influence of several Marxist and
leftist catholic worker organizations. In the 1980s the export model de-
accelerated, the workers formed an independent union the CUT - and class- based
party, the Workers Party (WP). The WP was a broad coalition of movements from
the urban slums, landless rural workers, petit bourgeois professionals and the
CUT. In 1989 the WP came within 2% of winning the Presidential elections. By the
early 1990s, the economic model based on state capital and the MNC was in
crisis: hyperinflation of over 1000%, rising debt payments and relative economic
stagnation led to a shift to the right and the election in 1994 of Cardoso, an
ex-Marxist sociologist. In summary, Brazil went through 4 phases: 1. liberalism
until 1930 crises; 2. national-statism 1935-64; 3. state-MNC export strategy
1965-94; 4. neo-liberalism 1995-2002.
President Cardoso and
the Neo-liberal Failure 1995-2002
President Cardoso's eight
year Presidency witnessed a reversal of 50 years of progress: he privatized the
most profitable and successful state industries and banks; he opened Brazil's
markets to cheap, subsidized food and information technologies, displacing
millions of peasants and undermining local industry; he borrowed heavily from
foreign banks mortgaging future export earnings and he deregulated the economy
leading to ecological devastation of the Amazon rain forest. The IMF, World
Bank, and private banks of the US, Japan and the European Union lent the Cardoso
regime tens of billions of dollars and called Cardoso a model reformer. Within
the country however the response from the workers, peasants and universities was
hostile.
Under neo-liberalism
Brazil's per capita GNP has been growing at 1%; its GNP in dollar terms has
declined from $705 billion in 1995 to $504.8 billion in 2001. Brazil's growth
rate in the 1990s is the lowest in the 20th century. Brazil's free market has
led to a negative trade balance throughout the past 8 years and after interest
payments and profit remittances of a negative cumulative current account balance
of $182 billion between 1995- 2002. The foreign debt has grown from $148.3
billion to $228.6 billion in 2001 and fast approaching $250 billion in 2002.
While Cardoso has been borrowing heavily overseas and paying exorbitant interest
rates, he has slashed public spending. In 1995 the regime spent 20.3% of its tax
revenues on education, in 2000 it spent 8.9%; in 1995 it spent 9.2% on higher
education in 2000, 4.2%. In contrast in 1995 it paid 24.9% of revenues in
interest payments for public debt, in 2000 it paid lenders
55.1%.
The response from the
left opposition is mixed. The MST landless workers movement occupied thousands
of uncultivated plantations and settled over 150,000 families, and was in
constant mobilization. The CUT, the trade union confederation, heavily
bureaucratized and dependent on government subsidies, made radical criticism of
the neo-liberal policies, but was not willing to mobilize the working class to
confront Cardoso. They preferred to adapt to the regime's offensive and receive
"compensation" for mass firings. Worst of all the Workers Party which began as a
coalition of grassroots movements which combined direct action and electoral
politics evolved into a bureaucratic party controlled by middle class
professionals and trade union bureaucrats and is completely oriented to
electoral campaigns and the privileges of government
office-holding.
Year 2002: Financial
Collapse, Elections and Anti-ALCA
The year 2002 is the year
of the near financial collapse of the Brazilian neo-liberal model. Debt payments
of 30 billion, capital flight of $20 billion, and interest rates of 18% to 20%
have driven Cardoso's neo-liberal economy to the verge of economic collapse in
the same manner as Argentina. Only a $30 billion loan from the IMF temporarily
staved off Brazil's bankruptcy. The real, Brazil's currency has devalued
over 40% since January 2002. The economy is totally stagnant with predicted
growth between 0 and 1 percent. Brazil's net public debt as a share of GDP is
60%. With only $15 billion in foreign capital flowing in and external financing
requirements of $50 billion, few public firms left to sell off and external
credit lines for exporters drying up, it is clear to everyone including
financiers, that the Brazilian neo-liberal economy is heading for a
crash.
In addition to the deep
structural problems, foreign and domestic investors are withdrawing their
capital from Brazil because of their lack of confidence in the leading
candidates in the Presidential elections. The pro-government candidate Jose
Serra is in third place with 15% support (Sept. 1, 2002) far behind the labor
front candidate Ciro Gomes with 25% and Lula da Silva of the WP with
35%.
In reality the electoral
fears of investors is not warranted as both Left candidates have accepted
neo-liberal programs. Ciro Gomes supposedly a center-Left candidate for the
Workers Front has endorsed the latest IMF adjustment program (August 2002),
supports the US-sponsored Free Trade Area of the Americas (ALCA in Spanish) and
promises to maintain the privatized enterprises and meet foreign debt payments.
He has appointed a disciple of Milton Friedman the free market guru, as his
principle economic adviser. Lula has selected a big textile capitalist who is an
enemy of the trade unions as his vice presidential candidate, formed an alliance
with the right-wing Liberal Party, embraced the IMF agreement and ALCA and
opposes MST land occupations. He has allied himself with the right-wing
Pentecostal church and has frequently met with US embassy officials and bankers
guaranteeing them continuity in economic policy. It is clear that there is
nothing progressive in Lula's program. He has renounced every social democratic
and anti-imperialist demand. Lula and the leadership clique of the PT and their
electoral machine are more interested in obtaining government positions and
serving the banks, than benefiting the people.
The fear of investors is
not directed at Lula but of his mass supporters who Lula might not be able to
control after he takes office. They fear he might not be sufficiently repressive
to contain popular demands. More significantly foreign investors fear that Lula
will not be able to implement his promises to the IMF austerity program because
of mass pressure. Foreign investment bankers know that Brazilian capitalism is
collapsing and that is the objective preoccupation; and they know that only a
hard right-wing regime will be able to savage living standards to meet external
debt payments. Hence they are not 100% confident in Lula, even through
programmatically he is today a liberal politician.
The evolution of the WP
in Brazil is typical of many former ex-Leftist parties. They start with internal
democracy and grass roots direct action, then they move to combining electoral
and grass roots organization; as they gain political office they become divorced
from the people's struggle, even as they continue to mouth the earlier Leftist
slogans; as the party becomes institutionalized it develops financial needs for
its electoral campaigns hence, it uses public funds and receives donations from
business interests. In the final phase the party openly embraces business
interests, suppresses internal democracy and offers empty platitudes to the
masses. The leaders become respectable guests of the US embassy, engage in
friendly dialogues with bankers and promise a "million jobs" for the poor and
unemployed.
2002: The Opposition
The major mobilization of
the Left in 2002 is not the electoral campaign but the referendum against ALCA.
The main forces engaged in this campaign is the MST, the progressive catholic
bishops, dissident trade union activists, the United Socialist Workers Party
(PSTU) and thousands of progressive movement and NGO activists. They hope to get
10 million voters to support the referendum despite the opposition of all the
mass media, all the major electoral parties and presidential candidates. The
anti-ALCA campaign is a nationwide organizing effort at anti-imperialist
education and opposition to a common market in which the US would clearly
dominate all trade and investment, destroying public services, local producers,
especially in agriculture and industry.
The ex-Maoist Communist
Party of Brazil is against the ALCA referendum but they are absent from the
struggle. Their main activity is supporting Lula's electoral
campaign.
The CUT is critical of
Lula because he has developed working relations with its rival the reactionary
trade union (Fuerza Sindical) and because he has an alliance with the anti-trade
union Liberal Party. But the leadership still actively supports Lula as the
"lesser evil" or as a "workers" candidate. Many trade union activists and
militants are either abstaining and some are supporting the PSTU, a Trotskyist
party with a radical Left program. The MST leaders have sharply criticized Lula
as have many catholic activists yet some of the MST leaders will vote for Lula,
while many rank and file activists will abstain, vote for the PSTU or more
likely continue to engage in the politics of direct action including land
occupations.
Conclusion
Brazil is an example in which
there is an apparent paradox: as the economic crises deepens and the neo-liberal
model collapses, the established Left parties and trade unions move to the
right, hoping to replace the current discredited bourgeois rulers as the
political managers of the capitalist class. It is possible, or even likely, that
one of the Left candidates (Lula or Gomes) will win the elections. In which case
they will face the task of confronting a collapsing economy, tied to their
commitments to the IMF thus guaranteeing failure, instability and rising social
discontent. The popular movement can build on the momentum of the anti-ALCA
campaign and organize independent mass organizations to go beyond the
referendum. The discrediting of the PT administrating an IMF package in an
economy in crises, opens the door to great opportunities for a new political
coalition of workers, peasants, students, progressive church people, bankrupt
businessmen and unemployed to engage in extra-parliamentary action. The crises
of a Left regime administrating a bankrupt liberal model is also an opportunity
for nationalist military officers to seize power. The IMF, World Bank, the US
and the EU and Japan will be active pressuring Lula to repress discontent and
meet the debt payments despite mass unemployment. The post-electoral period will
soon become a time of deepening polarization and economic collapse. The results
of elections of 2002 will not resolve any of Brazil's major problems. The answer
lies in the successful mobilization and organization of independent class
organization in taking state power.
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