Have sympathy for the political chaos in Brazil. It could happen in America.

Summary: Street protests and loss of support in parliament have brought down Brazil’s government through quasi-legal impeachment, without the bother of elections. Could this happen in America? The preconditions — the tinder — already exist here, awaiting only a spark. This analysis by Prof Perry Anderson of shows how quickly a seemingly strong and powerful political regime can unravel; the similarities to America are obvious. The results will be ugly for Brazil; as they will they be for us should US elites follow Brazil’s example.

View of the renewed Christ the Redeemer

AFP PHOTO/VANDERLEI ALMEIDA.

Excerpt from “Crisis in Brazil” by Perry Anderson

London Review of Books, 21 April 2016
Posted with his generous permission

Half-hidden, the roots of this debacle lay in the soil of the Workers’ Party’s {PT} model of growth itself. From the outset, its success relied on two kinds of nutrient: a super-cycle of commodity prices, and a domestic consumption boom. … Compounding the end of the overseas bonanza, domestic consumption hit the buffers.

Throughout its rule, the core strategy of the PT had been to expand home demand by increasing popular purchasing power. That was achieved not only by raising the minimum wage and making cash transfers to the poor – the Bolsa Família – but by a massive injection of consumer credit. Over the decade from 2005 to 2015, total debt owed by the private sector increased from 43 to 93% of GDP, with consumer loans running at double the level of neighbouring countries. By the time Dilma Rousseff was re-elected {as president} in late 2014, interest payments on household credit were absorbing more than a fifth of average disposable income. Along with the exhaustion of the commodity boom, the consumer spree was no longer sustainable. The two motors of growth had stalled.

In 2011 the aim of Mantega’s new economic matrix had been to kick-start the economy by lifting investment. But his means of doing so had diminished. …Offering preferential rates to leading companies that added up to a much larger subsidy than outlays to poor families, the ‘Bolsa Empresarial’ cost the treasury about double the Bolsa Família. Favourable to large commodity and construction firms, this direct expansion of public banking was anathema to an urban middle class in an increasingly violent anti-PT mood, with the local media – amplified by the business press in London and New York – vituperating the dangers of statism.

Dima Rousseff

Former President Dima Rousseff. AP Photo/Eraldo Peres.

Switching direction, Mantega sought to boost private sector investment by tax concessions and lower interest rates, at the cost of a reduction in public infrastructural investment, and to help manufacturers by a devaluation of the real.

But Brazilian industry was wooed in vain. Structurally, finance is a much stronger force in the country. The combined capitalisation of its two largest private banks, Itaú and Bradesco, is now twice that of Petrobras and Vale, its two biggest extractive firms, and far sounder. The fortunes of these and other banks have been made from the highest long-term interest regime in the world – crippling for investors, manna for rentiers – and staggering spreads between deposits and loans, with borrowers paying anything from five to twenty times the cost of the same money to lenders. Flanking this complex is the sixth largest bloc of mutual and pension funds in the world, not to speak of the biggest investment bank in Latin America, and a swarm of private equity and hedge funds.

In the belief that this must rally manufacturers to its side, the government confronted the banks by forcing interest rates down to an unprecedented real level of 2 per cent by the end of 2012. In São Paulo the Employers Federation briefly expressed its appreciation of the change, before hanging out flags in support of the anti-statist marchers of June 2013. Industrialists had been happy to reap high profits from the positive-sum period of growth under Lula, in which virtually every social group saw its position improve.

But when this ended under Dilma, and strikes flared up, they were unmoved by the favours granted them. Not only were big companies in the real economy, like their counterparts in the North, themselves often long on financial holdings negatively affected by sharp pressure on rentier revenues, and for that reason not readily detachable from banks or funds, but as a social group most manufacturers formed part of an upper middle class much more numerous, vocal and politicised than the ranks of businessmen proper, with greater ideological and communication capacity in society at large.

The rabid hostility of this stratum to the PT was inevitably shared by manufacturers too. Between bankers above and professionals below, each committed to bringing down a regime now threatening their common interests, producers lacked significant autonomy.

Against this front, on what support could the PT count?

  • The trade unions, if somewhat more active under Dilma, were a shadow of their combative past.
  • The poor remained passive beneficiaries of PT rule, which had never educated or organised them, let alone mobilised them as a collective force.
  • Social movements – of the landless, or the homeless – had been kept at a distance.
  • Intellectuals were marginalised.

But not only had there been no political potentiation of energies from below. The style of the material benefactions of the regime created little solidarity. There was no redistribution of wealth or income: the infamously regressive tax structure bequeathed by Cardoso to Lula, penalising the poor to pamper the rich, was left untouched. Distribution there was, appreciably raising the living standards of the least well-off, but it was individualised in form.v…Increases in the minimum wage meant there was an expansion of the number of workers with a carteira assinada, entitling them to the rights of formal employment; but no rise, if anything a decline, in unionisation.

Above all, with the arrival of crédito consignado – bank loans at high interest rates deducted in advance from wages – private consumption was unleashed without restraint at the expense of public services, whose improvement would have been a more expensive way of stimulating the economy. Purchase of electronics, white goods and vehicles was fanned (cars through tax incitements), while the water supply, paved roads, efficient buses, acceptable sewage disposal, decent schools and hospitals were neglected. Collective goods had neither ideological nor practical priority.

So along with much needed, genuine improvements in domestic living conditions, consumerism in its deteriorated sense spread downwards through the social hierarchy from a middle class besotted, even by international standards, with magazines and malls.

How damaging this has been for the PT can be seen in the fate of housing, where collective and individual needs most visibly intersect. With the consumer bubble came a much more dramatic real-estate bubble, in which vast fortunes were made by developers and construction firms, while the price of housing for the majority of those living in big cities soared, and about a tenth of the population lacked adequate dwellings. From 2005 to 2014, credit for real-estate speculation and construction increased twenty times over; in São Paulo and Rio prices per square metre quadrupled. In São Paulo, average rents increased 146% in 2010 alone. …Rather than itself increasing the supply of popular housing, the government funded private contractors to build settlements at a handsome profit in exurban areas, charging rents typically beyond the reach of the poorest layer of the population …

Lacking any popular counter-force to withstand concerted pressure from the country’s elites, Dilma no doubt hoped, after her narrow re-election, that by beating an economic retreat, with an initial belt-tightening like that of Lula’s first years in power, she could reproduce the same kind of upturn. But external conditions precluded any comparable outcome. The dance of the commodities has gone, and recovery, whenever it comes, is likely to be subdued.

It can be argued that, viewed in context, the extent of current difficulties should not be exaggerated. The country is in a severe recession, with GDP falling 3.7% last year, and probably much the same this year. On the other hand, unemployment has yet to reach the levels of France, let alone Spain. Inflation is lower than in Cardoso’s last years, and reserves higher. Public debt is half that of Italy, though given Brazilian interest rates, the cost of servicing it is far greater. The fiscal deficit is below the EU average.

All these figures are likely to worsen. Still, so far the depth of the economic hole does not match the volume of ideological clamour about it: partisan opposition and neoliberal fixation have every interest in overstating the country’s plight. But that scarcely reduces the scale of the crisis in which the PT is now floundering, which is not just economic, but political.

——————— Read the rest at the LRB ———————

For more about the Brazil crisis

NYT: “Dilma Rousseff Targeted in Brazil by Lawmakers Facing Scandals of Their Own“. Also see this from The Economist (typically for them, a steadfast opponent of the PT)…

“We continue to believe that, in the absence of proof of criminality, Ms Rousseff’s impeachment is unwarranted. The proceeding against her in Congress is based on unproven allegations that she used accounting trickery to hide the true size of the budget deficit in 2015. This looks like a pretext for ousting an unpopular president. The idea, put forward by the head of the impeachment committee, that congressmen deliberating Ms Rousseff’s fate will listen to “the street”, would set a worrying precedent. Representative democracies should not be governed by protests and opinion polls.”

Glenn Greenwald at The Intercept has provided some of the best coverage of this sad story. This says most of what we need to know: “To See the Real Story in Brazil, Look at Who Is Being Installed as President — and Finance Chiefs“.

Could it happen in America?

Governments in the Ukraine and Brazil were brought down by street protests and quasi-legal machinations of their elites. We have had precursors: the impeachment of Bill Clinton and the Supreme Court’s action in Bush vs. Gore. Worse, surveys show the weakness of the US political regime. Gallup’s Confidence in Institutions poll asks people if they have “a great deal” or “quite a lot” of confidence in…

  • Big business: 21%.
  • TV news: 21%.
  • The Presidency: 33%
  • The Supreme Court: 32%
  • Congress: 8%.

Equally ominous are surveys asking if America is moving in the right direction.

The results were ugly for Ukraine. They’ll probably be ugly for Brazil, exacerbating the existing economic and political crises. It will be for the US, as well. An ancient oak might look indestructible, but strong winds reveal its rotten roots.

Perry Anderson

About the author

Perry Anderson is a Professor of History at UCLA; see his research and publications page and his Wikipedia entry.

See his other posts at the LRB, and those at the New Left Review. He has published many books, such as Spectrum: From Right to Left in the World of Ideas (2005), The Indian Ideology (2013), and American Foreign Policy and Its Thinkers (2015).

I strongly recommend adding the LRB to your reading list

For More Information

If you liked this post, like us on Facebook and follow us on Twitter. See all posts about Politics in America, about Reforming America: steps to new politics, and especially these…

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Two books by Perry Anderson explaining his views in more depth…

4 thoughts on “Have sympathy for the political chaos in Brazil. It could happen in America.

  1. epagbreton

    Goodness. Greenwood and LRB links much appreciated. Overwhelming at first read, actually. Fifth most populous country. One turns away and looks back and then it’s too late.
    Regards

    Breton

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    Reply
  2. restless94110

    Bravo. I had read the Greenwald aritcle and several others, but this is by far the best. It’s just makes more clear my personal epiphany of the last 5 years: to understand the politics of a situation, understand the economics of a situation.

    It is so disappointing to see left-wing parties and elected regimes fall for the debt-bomb economics of the advisers and experts. The parties and their leaders naively believe that this kind of economic development and direction will lead to better times. It always doesn’t.

    That they assist in this way in cutting themselves off at the knees, is the worst development of the past several decades. Then they wonder why the people turn to the right. What else is left?

    Stupid, naive, wrong-headed. Yes, it could happen here as well…

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    Reply
  3. Pingback: On the Day after Memorial Day … | Bill Totten's Weblog

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