Brazil has just experienced another “lost decade”

A recent issue of the Economist devoted a long special article to the Brazilian economy and what he called a “dismal” performance over the past decade. One of the root causes of the country’s current situation, according to the article, was the failure of recent governments to implement adequate neoliberal reform.

The diagnosis of a magazine known as a champion of liberal liberalism is by no means surprising, but does the analysis hold up to scrutiny? In fact, a closer look at the data suggests that the opposite conclusions can be drawn. If, indeed, the last decade in Brazil has seen a tragic economic decline, it is by no means due to a lack of neoliberal orthodoxy but rather an adherence to it.

It is common knowledge that capitalism in Brazil is in crisis. Its effects are dramatic. The last ten years should be seen as yet another “lost decade” for the country, the first having taken place in the 1980s. Worse, the data shows it to be the worst decade in 120 years. In the past decade alone, Brazil has experienced two major recessions, the first from 2014 to 2016, and another starting in 2020 – and there is no end in sight.

Between 2011 and 2020, Brazil’s gross domestic product (GDP) grew on average only 0.27% per year. During the previous “lost decade” (1981-1990), average annual growth was 1.57%, almost six times more. Similarly, between 1981 and 1990, the GDP per capita fell by 0.4%; in the current decade the decline has been much larger, at 0.56%. Data from 2020 shows that the country’s GDP is 6.4% lower than in 2014, and its GDP per capita decreased by 10.8% during the same period. Brazil is significantly poorer than it was ten years ago.

Brazil is deindustrializing at a rapid rate. At its peak in 1985, the manufacturing sector accounted for 36% of GDP. After the hard knocks of the last decade, industrial production is 12.4% lower than it was in 2011. In 2020, only 11.3% of GDP comes from the manufacturing sector, which is less than it was in 2011. ‘has been in over seventy years.

The proportion of high and medium-high technology in Brazil’s industrial exports also declined from 43% in 2000 to just 32% in 2019 – the lowest point since 1995. These figures reflect an economy in which the country’s industry is concentrated in low technological complexity. and value-added products.

In contrast, exports in general have doubled since 2000, with China being the main buyer. For the most part, it is “agro-industry” – what sociologist Zander Navarro describes as Brazil’s “new” rural economy – that explains these exports. Technologically advanced and geographically concentrated, agribusiness has led to a massive increase in unemployment resulting in migration from rural to urban areas.

The 2017 agricultural census shows that only 2 percent of rural settlements account for 71 percent of the gross value of everything produced. As Navarro explains, the old separation between the large landowners who, for the most part, produced for export, and the small landowners who supplied the domestic market no longer exists. Since the 1980s, “small and medium-sized producers have been cornered” by agro-industry – and with a negative impact.

During his tenure in government, the Workers’ Party (PT) worked hard to create jobs and reduce the most extreme poverty. Since 2014, however, this trend has been starkly reversed. Data shows that underemployment fell from 14.9 percent in 2014 to 28.7 percent in 2020. Informal employment is also a problem, with around thirty-nine million Brazilians currently working informally.

All of this is happening at a time when the rich in Brazil are getting richer. Between 2010 and 2019, the annual profits of the four big Brazilian banks combined more than doubled, from 38.91 billion to 81.51 billion. reais.

Today, therefore, Brazil is emerging from its last lost decade with low growth rates, in a highly financialized economy, and a return to products with low added value, while unemployment, precarious and informal work, poverty. and inequalities are all on the rise. .

Austerity policies – generated by both left and right – are largely responsible for this result. Far from delivering the economic growth they promised, these policies have resulted in decline and stagnation.

Although there were predecessors, it was the adoption of a set of macroeconomic policies [“tripé macroeconômico”] in 1999 which brought the first signs of austerity to Brazil. Still in effect today, this involved inflation targets, floating exchange rates, and fiscal adjustment. In 2000, the “Fiscal Responsibility Law” arrived which limited the space for social spending and, in due course, a “modernization” program resulted in further privatizations, financial liberalization and continued labor reforms. and social security.

Although the PT succeeded in raising the minimum wage, the introduction of the bolsa familia, popular credit, and to some extent the resumption of public investment, its weak developmentalism ultimately kept much of the previous economic arrangements in place. Its best economic policies – which have had real and significant social benefits – have proven to be fleeting since the end of the commodity super cycle, and financial surpluses are no longer available.

After weak and uncoordinated attempts to resist this arrangement, an aggressive fiscal adjustment arrived in 2015, established as the hegemonic program of the country’s political and economic elites. This resulted in a further dismantling and a decline in the investment power of national banks and other state-controlled companies like Petrobrás.

It also means that the “new tax regime,” whose guidelines include a draconian and suffocating “spending ceiling” for the next twenty years, has been enshrined in the letter of Brazil’s federal constitution. Unique in the world, this tax system weakens the State’s capacity for economic and social action, thus threatening its day-to-day functioning. The recent scandalous statement made by the current Minister of the Economy, Paulo Guedes, on the profligacy of the poor illustrates well the view of the elite on the economy.

Certainly, the introduction of measures to deal with the current pandemic has led to a significant increase in public spending. Among the measures is the limited but relatively large emergency benefit paid directly to individuals, despite resistance from the federal government.

The government’s capacity for economic intervention and for relief spending once again raises the question of austerity. Since the start of the pandemic, the right has stood firm on the austerity stance, even trying to raise the stakes by giving the central bank full autonomy, while giving more tax cuts to the rich and pushing further privatizations.

Amid such a weakened economy, made worse by a far-right government, progressives in Brazil are looking for a solution. But while austerity has been overwhelmingly rejected by the left, there is little agreement on what should happen next. Developmentalists argue for the “return of the state”; that is to say a return of the state’s capacity to intervene forcefully in the economy. But despite the good intentions of those who defend such a thesis, the “return of the state” argument is often based on diagnoses that underestimate some of the deeper causes of the economic situation, such as those discussed above. Without a lucid analysis of the problems inherent in the Brazilian economy, the arguments for stronger state intervention lose their force.

Developmentists of all stripes may be inclined to pay insufficient attention to the structural problems of the Brazilian economy: its subordinate position in the international division of labor and production, its dependence on raw materials and their exports to Brazil. China, its chronic shortage of public and private investment, its stagnant productivity and its low-skilled workforce.

Developmentists are also prone to ignore the class character of the state and its structural role in the capitalist economy. This is particularly clear in Brazil where the dogmas of austerity are applied as a political weapon by a “broad front” – uniting bolsonarists and anti-Bolsonarists – subordinate workers and the poor.

In a context where the political and economic elites of Brazil have closed the door to social reform, what precisely does the “return of the state” mean? In Brazil today, the crisis can be managed (for the benefit of a few) but the stagnation and the widespread misery that accompanies it are systematically accepted.

More than that, however, the permanent question that remains is a political one: who will orchestrate the “return of the state” in a post-pandemic Brazil? Which social actors will force this on the agenda? As important as they are, any economic action project can be futile if it is not accompanied by new and concrete efforts to (re) organize popular forces. Such an effort will require, in the light of the evidence, an honest and creative reflection on the crisis of the left as a whole, and its forms of organization in contemporary Brazil and elsewhere.

About Natalee Broderick

Natalee Broderick

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