What will the result of the economic policy implemented in the country be? Can we leave the economic and political crisis alone? It is very unlikely
By Nildo Ouriques – Professor of Economics and International Relations at the Federal University of Santa Catarina (UFSC), President of the Latin American Studies Institute
The Brazilian ruling class produced a dangerous consensus for the country: according to them the major newspapers, TV, radio, deputies and senators (major parties), economics professors and governors, the country is experiencing a severe fiscal crisis. The production of this ideological consensus refuses to see the root cause of all our current ills: a huge financial crisis of the state, the product of mega public debt (internal and external) organized since 1994, when came into effect the Plano Real (which established Brazil’s current currency).
In June 1994, when former President Itamar Franco announced the Plano Real, the domestic debt did not surpass 64 billion reais. Fernando Henrique Cardoso won the election that year, and at the end of his second term, debt reached 720 billion reais. The multiplication of debt is no secret: economists decided to control inflation with a sharp rise in interest rates at higher levels to 50%! In the last two decades, Brazil has almost always been the world champion of interest rates, fuelling an unprecedented rentist republic, where all capital fractions (multinationals, bankers, landlords, traders and pension funds) are fed at the expense of public debt. The Lula government (2003-2010) doubled the bet, when debt reached 1.5 trillion reais. The PT (Workers Party) government of Dilma Rousseff did not soften the generosity: debt reached the stratospheric figure of 3 trillion reais.
What is the most important consequence of the phenomenon? The government allocates half of the public budget, or almost half of everything it collects in taxes for the payment of debt interest that nevertheless continues to grow at breakneck pace. In 2014, for example, the government allocated 45.11% of all tax revenues to interest payments and partial debt relief. It is as if the country worked in the rhythm of a war economy, like Nicaragua in the 1980s. However, the debt continues to grow every month, fuelling the rentism of the holders of government bonds.
The numbers make it clear that we do not suffer a fiscal crisis, i.e. caused by the assumption that the “government collects too much and spends much worse.” Indeed, there is fiscal surplus if we take out government’s financial expenditure on debt interest. The 1988 constitution in force provides for the audit of the debt, but the parliamentary majority composed by the two main parties in the country (the ruling PT and the opposition PSDB, the Social Democrats) prevents any movement in this direction. Thus, parties are struggling in minor issues (reduction of legal age, quota system, etc.) while maintaining strong alliance on economic issues. Similarly, any serious attempt to reform the political system ends in minor changes in the electoral system that, in fact, are unable to grant representation to the political system, each day further away from the popular majorities and even the average voter.
It should be noted the essential: the PT-PSDB consortium rightly manages the political situation. Despite the mutual accusations of corruption and petty quarrels in Congress, the truth is that in the field of economics and central issues, both the PT and the PSDB are substantially in line. It is the ‘petucano’ system, a mixture of PT and PSDB that for a significant number of voters have no difference, which is why between abstention, the invalid and white vote, reached 37 million people in the second round of an election considered as “the most disputed of Brazilian democracy.” It is of considerable figure when you consider that the re-elected president took 54 million and Senator Aécio Neves, defeated candidate, reached 51 million.
In this context, more important than the existence of the PT’s social programs is the continuity of this golden rule of monetary stability in the country: the religious payment of debt interest system. It is true that the latest measures voted on in parliament take workers’ rights and, again, we can see how PT and PSDB vote together on key issues. Both have the same focus and public discourse: the country “must” seek the primary fiscal surplus to honour the financial cost of domestic debt and the additional costs of external debt.
In the public debate, this matter is always hidden from the general public. The press, displaying unwavering commitment to press freedom, acts as if it was in fact submitted to the united order that we can see in military parades. As a result, it simply ignores the phenomenon. No one writes or debate the public debt mega-state that guarantees extraordinary profits for all capital fractions and intended for the poorest sectors of the population measly 0.47% of GDP for the Bolsa Familia program, considered the government’s main social program. While the government spends nearly 10% of GDP to the annual increase of the debt, not even 0.5% goes to social program that has been considered the most important in the history of the country.
Therefore, there can be no doubt about the immediate future. The liberal illusions under which the “social question” was being addressed by social policies are over. The abysmal income inequality – a product of the overexploitation of the labour force – cannot be resolved without touching the property and power of the rich. The ‘petucano’ system lived comfortably keeping the poor in poverty without killing them hungry. The budget crumbs (0.47% of GDP) constituted Catholic charity and spent the pleasant impression to the rich and powerful that could face violence and misery of millions of Brazilians with programs that quickly found the support of the two main parties in the country. The economic crisis, derived from the corrosive and silent action of debt interest and falling prices of agricultural and mineral products exported by Brazil, severely limited the possibilities of consensus and, consequently, the ‘petucano’ system agreed that the adjustment was even inevitable.
What will the result of the economic policy implemented in the country be? Can we leave the economic and political crisis as it is? It is very unlikely. The measures guided by the International Monetary Fund – unable to take the small peripheral countries of Europe from the violence of the financial crisis – won’t work in the Latin American capitalist periphery either. The number of poor and miserable already returned to growth and there is no privatization program – roads, ports, airports, etc. – able to raise the investment rate in the economy because the ongoing rise of the interest rate becomes even more attractive to resist investment rather than productive one. This year, there is a clear reduction of the industrial sector and the livelihood of GDP growth rates close to zero is possible only because agriculture – fuelled with pesticides and for export – continues to grow. In short, the country suffers serious industrial regression and strengthens its position in the international division of labour as a mere exporter of agricultural and mineral products. However, the scholars, the dominant journalism and politicians and successful businessmen will follow stating his optimism in the country while Brazil deepens the essential characteristics of any country underdeveloped and dependent.
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