Thursday, April 21, 2016

Some thoughts on the impeachment and the right wing turn in Brazil

Riding the coup bike without the military

Brazilian President Dilma Rousseff has been impeached. The vice-president, Michel Temer, will assume the presidency temporarily while she is judged by the Senate. While the final outcome is still uncertain, it is very unlikely that she will return to office. This closes the long cycle of the left in Brazil, which started with the election of Luiz Inácio Lula da Silva to the presidency in 2002, and that led to the election and re-election of the candidates of the Workers’ Party (PT in the Portuguese acronym) since then. The roots of the current crisis are deep, and are not simply associated to corruption or to discontent with economic the poor performance of the country.

Protests started as far back as June 2013. The spark for those protests came from the cost of public transportation in São Paulo and other major cities, and the groups initially connected to the organization of the movement were clearly associated to left of center positions. On the other hand, as the protests gathered momentum the range of demands increased, to include spending with the 2014 World Cup and the Olympics and against corruption in general, with an increasing number of right wing groups linked to the popular demonstrations. In other words, there was a broad range of demands, and the groups associated with the popular protests had a mixed political character, from left of center movements to right wing libertarian groups, some of which were funded by the Koch brothers.

Many saw the 2013 protests as the beginning of the end of PT’s dominance in Brazilian politics. And it was true that some elements on the left were part of the protests, and that, in a range of issues from the economic to the social, PT had failed to live up to the expectations. It is important to note there were many reasons to be disappointed with PT’s achievements, since the party had accepted conservative economic policies early on in the 2002 “Letter to the Brazilian People,” in particular putting fiscal discipline and inflation at the center of the economic agenda. And Brazil’s economic performance was below the average for Latin America for most of the 2000s, with growth of about 3.5% per year between 2003 and 2014, which would be considered mediocre by the standards of the other BRICs that were lionized in the media as the next big thing in the world economy.

Further, the problems were not just in the economic front. Brazil was much slower, and considerably less effective than other left of center governed countries in the region in dealing with the human rights record of the military dictatorships. Something that also was to some extent expected by left of center groups. To make things worse, the security policies maintained a pattern of abuse of human rights, discrimination and racism, which have a long history in Brazil. The ‘pacification’ policies is in many cases were just part of a pattern of criminalization of poverty and state sanctioned killings of slum (‘favela’) dwellers. Not surprisingly the 2013 protests had a strong component of left wing participants.

On the other hand, in spite of the poor economic performance and the limitations of the human rights policy record, the expansion of formal employment, the doubling of the minimum wage, the expansion of the social programs, among them the Bolsa Família, the implementation of affirmative action policies and the expansion of public education, have led to a significant reduction of inequality over the last ten years, even if it is hyperbolic to suggest, as many social analysts have done and the mainstream media repeated ad nauseam, that a new middle class has emerged as a result. On the strength of the social record of her policies, Dilma won a narrow reelection in 2014, with the promise to expand social spending, to promote economic growth and to stand against banks' greediness, reducing interest rates. After the reelection, however, the government did a 180-degree turn, appointed a Finance Minister, Joaquim Levy, who came from one of the largest banks in the country, and adopted austerity policies, fiscal adjustment and higher interest rates to control inflation. Growth, not surprisingly, collapsed with a decline of GDP of about 3.8% in 2015.

Protests intensified in the streets, while the corruption charges, in particular those associated with the scheme of bribes and payments at the State oil giant Petrobras, within the so-called Car Wash (‘Lava Jato’ in Portuguese) Operation, taking center of stage. A few things should be noted in this context. Corruption is not limited to the government or the parties in its coalition, and in fact it is clear from the investigation that corruption at the state oil company goes back many years, certainly all the way to the government of Fernando Henrique Cardoso of the Brazilian Social Democracy Party (PSDB in Portuguese), a right of center party, in spite of its name. Interestingly enough, while Aécio Neves, the PSDB candidate that lost the last election in 2014, has been named in the corruption scandal, president Rousseff seems to be completely untainted by accusations of corruption. More importantly, the central issues related to corruption are the structural ones. That is the elements that make corruption a necessary feature to manage the country, like the need to buy votes in congress to pass legislation, something that has made the Brazilian Democratic Movement Party (PMDB in Portuguese) an essential element for governability. In fact, PMDB is at the center of all corruption scandals and the beneficiaries of the impeachment, including the Vice-President, are members of that party.

Clearly, the impeachment of Dilma Rousseff is not about corruption, and the actual process hinges on the delay in the payments to public banks (the so-called 'pedaladas'), which in the view of some imply the government is borrowing from public banks, which is against the Law of Fiscal Responsibility, but not on the corruption scandal per se. Note that this fiscal accounting devices were a common practice, even in previous governments, were never questioned, and can hardly be considered a crime that requires the impeachment of the president. Further, although her government is highly unpopular, since even left of center groups have been protesting, and more so since she embraced the austerity policies after reelection, it is not true that the impeachment is popular. Public manifestations against the impeachment have been as large, if not larger, than pro-impeachment protests, and the country remains essentially evenly divided, as it was during the 2014 election. In that sense, the impeachment is certainly not about the preservation of democratic institutions.

Socioeconomically speaking the poorer and the afro-descendants tend to be against impeachment, and that was reflected in the votes in Congress, to a great extent because these groups were the main beneficiaries of PT’s social policies, and real wage increases. On the other hand, the middle class and the business groups, as represented by Federation of Industries of the State of São Paulo (FIESP in Portuguese), have been decidedly in favor. There is a clear class, and that in Brazil means race too, component to the impeachment process. So there are good reasons to believe that the impeachment represents a modern type of coup, based on the utilization of media for the mobilization of public opinion, and for bringing down a government, that, even if moderately, has reduced inequality in one of the most unequal countries in the world. The impeachment is about social class and inequality, and the possibility of a left of center project.


  1. Matias Vernengo
    A very good analysis. I've just appointed it in a post on Luis Nassif blog.
    I am not an economist, and my english is from Google Translate, but I can not resist putting some disagreement with your analysis.
    First, my criticism is directed to what I call a non-comprehensive view of economic reality by economists. Perhaps the most important to help you think about the economy in a global way, or to think about the economy in a more interactive way with the various human activities, is to recognize inflation as a political issue rather than an economic problem. And economists are far from recognizing this fact.
    There is no doubt that economic crises always generate political crises, but when you think that, when the French, the Russian and the Chinese Revolution arrived, there was a hyperinflationary process, maybe you can give more importance to inflation in its political effects.
    I always like to illustrate what occurred in Colombia in the 80s and 90 to clarify this point of the political importance of inflation. In the 80s and 90s probably Colombia was one of the country that grew faster in South America or maybe one of the country with the highest economic growth in South America. But at that time inflation was always in double digits. At the same time was one of the few countries where guerrilla thrived. When Colombia reduced inflation, the guerrilla virtually disappeared
    This approach of perceiving inflation as a political problem shows the most understandable reason for "The Letter to the Brazilian People" and also the economic policy that has been adopted since 2003.
    And the observation that Brazil has low economic growth when considering the GDP growth average from 2003, compared with other countries in South America is best understood when you consider not only the issue of inflation but also takes into account the brazilian high debt. Debt that originated of the need of Fernando Henrique Cardoso count on popular support and for this he had to reduced inflation at a level far beyond acceptable for a large and poor country like Brazil.
    Another aspect that I disagree concerns the economic policy of the second government of President Dilma Rousseff. I leave this issue, however, for further comment.
    Clever Mendes de Oliveira
    BH, 04/21/2016 (In Pedra Azul)

    1. Oi Clever. Pode postar em português. E obrigado por botar um link no site do Nassif. O Nassif não deve ter gostado muito. Uma vez numa mesa organizada na UFRJ, quando o Palocci era ministro eu apresentei uma crítica dura da política fiscal contracionista dele, com o título 'Ridi Palocci, Ridi' (em lugar de Pagliaccio). Sobre a inflação, se vc ler o que eu escrevo verá que discuto exatamente como ela é causada por conflito distributivo. E em 2002, qdo da carta ao povo brasileiro, não havia risco algum disso.


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