Brazil’s Crisis Won’t be Solved by Economic Liberalism

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Edemilson Paraná rubbishes claims that Brazil’s economic and social crises have emerged from a lack of liberal reform, and examines the emerging project among Brazilian elites. This article was translated by Ticiana Albuquerque.

The British magazine The Economist produced, in its latest issue, a rather long special feature on the last 10 “dismal” years in Brazil. Among the reasons for such a desolated social and economical outcome, the publication lists several factors, including the inability of recent governments to enact neoliberal reforms. However, as we go deeper into the data, the absolute opposite is what can be inferred: the economic tragedy of the last decade is directly connected to an adhesion to neoliberalism and its dogmas, strongly reinforced by the rise of the far-right in Brazil.

It is common knowledge that capitalism in Brazil faces a deep and prolonged crisis. Its effects are dramatic. The last 10 years may be unequivocally grasped as yet another “lost decade” for the country. More than that: the data expresses that it was the worst decade over the last 120 years. Brazil clocks-up two strong historical recessions over the aforementioned period, the first one from 2014 through 2016 and another beginning in 2020, the latter without any clear perspective for a short term recovery since, along with the economic crisis, one can add an out of control pandemic situation.

From 2011 through 2020, the Gross Domestic Product (GDP) grew by an average of 0.27% a year. In the previous lost decade, from 1981 through 1990, the average yearly growth was1.57% – almost 6 times greater. Maintaining the same grounds for comparison, in the previous lost decade – 1981-1990 – the GDP per capita fell by 0.4% while in the current lost decade, 2011-2020, the fall amounted to 0.56%. Currently, Brazil’s GDP (data from 2020) is 6.4% lower than it was in 2014 and its GDP per capita has decreased by 10.8% in the same period. One can say to sum up that Brazil is poorer.

As a commodities producer, Brazil is increasingly specializing in primary products with low added value, with low demand on technology and scientific knowledge, which impacts directly on other areas of national life, since we cannot separate economic, social and political changes, which are all permanently interconnected.


A de-industrializing country

In order to accurately portray the current reality in Brazil, let us draw from the data of the proportion of manufacturing industry in the economy, now representing only 11.3% of GDP (numbers from 2020), reaching its lowest point in a historic phase which began in 1947 (then, with 19.9%, almost double the current number). In 1985, this sector represented almost 36% of the Brazilian GDP. As such, it is noticeable how the share of the country’s GDP relative to industrial activities is at its lowest since the end of the 1940s. As a result of the past decade, industrial production in 2020 was 12.4% lower than in 2011.

The proportion of high and medium/high technology in Brazil’s industrial exports has regressed from 43% in 2020 to only 32% in 2019, the lowest percentage since 1995. In other words, whichever little amount is exported by the country’s industry is concentrated in low technological complexity and added value products.

Let us draw data from another sector, which seems to present the opposite outcome, in order to compare. Exports of all kinds have doubled between 2000 and 2020, with China as the main commercial partner – a market that buys, from Brazil, mostly primary products. According to Social Scientist Zander Navarro, that all sums up to a “new” kind of rural economy in Brazil. It is an “agribusiness” marked by technological advance, high productivity, economical concentration and, therefore, massive unemployment leading to migration from rural to urban areas. The Agricultural Census of 2017 shows that only 2% of rural establishments make up for 71% of the gross value of all that is produced. In the words of Navarro:


[t]he ancient dual segmentation between major land owners prone to exports and, in another subsector, the medium and small supplying the domestic market, as it prevailed up until the 1980s is ceasing to exist. It is an unconcluded yet no return passage. Medium and small producers are being cornered.


Hence the ultimate shift of the “social question” from the countryside to the cities. The previous situation with the creation of low-income formal jobs and decrease of extreme poverty in Brazil during the mandates of the Workers Party (PT – Partido dos Trabalhadores) has been strikingly reversed since 2014. The underutilization of the workforce has leaped from 14.9% in 2014 to 28.7% in 2020, plus the observation of an increase in misery all around the country. A high informality in employment has also been observed with 39 million Brazilians in such conditions as of December 2020.

This draws a picture where financial markets and institutions and their financial elite counterparts become increasingly powerful over economic policies, decisions and their effects, leading to unequal gains and losses among economic sectors and classes. From 2010 through 2019, the annual profits of the four major Brazilian banks put together went from 38.91 to 81.51 billions of reais, which corresponds to a nominal growth of 109.4%.

Low growth rates, deindustrialization, reprimarization (reversion to low value added products), financialization and economic concentration in multiple sectors with an increase in unemployment, precariousness, poverty and inequality: such is the Brazil that emerges from the latest “lost decade”.

The failure of programs, predictions and promises

Dominant economic policies – both from the right and “left” wings – mainly based on “austerity” dogmas are largely responsible for this outcome. These policies delivered, at a structural and systematic level as seen, the opposite of their triumphant promises: the highly desired economic growth.

Despite prior developments that should not be disregarded, the milestone of austerity policies took place in 1999 with the adoption of the macroeconomic ‘tripod’ that continues today: inflation targets, floating exchange rates and fiscal adjustment. Immediately after, in 2000, came the “Fiscal Responsibility Law”, that limited the space for social spending. The opening of the economy and privatizations, financial liberalization, fiscal adjustment and continuous labor and social security reforms are added to this supposedly economical “modernization” package.

The Workers Party’s weak-developmentalism kept this arrangement in place, taking advantage of the margins opened by the supercycle of commodities and its positive effects on domestic economy – notwithstanding a package of income distribution measures, appreciation of minimum wage and popular credit offers, followed by a fragile resumption of public investment. The project for consolidation of the country as a mix of “high-tech-plantation” and “financial-valuation-platform”, granting short-term financial gains with a strong currency was maintained and in some aspects strengthened. Even those public policies implemented over the aforementioned period, whose social effects must not be ignored – although, by this point, they have proved to be frail and ephemeral – were conceived and implemented under this framework and its regulations, in short, within the scope of financial rationality. Fiscal surpluses were systematically triggered at least up until 2013, to mention another significant element of this foundation.

After weak and uncoordinated attempts to resist this arrangement, the aggressive fiscal adjustment in Brazil was made definitive as of 2015, established as the hegemonic program of the country’s political and economic elites. In addition to the ever-growing dismantling and continuous decline in investment power and action of the national public banks such as the National Bank of Economic and Social Development (BNDES, in Portuguese) and other state-controlled companies such as Petrobrás, this development – already in a new and darker political ambiance – consolidates with the inclusion in the Federal Constitution of a “New Fiscal Regime”, whose guidelines include a draconian and suffocating “spending cap” for the next 20 years. Unparalleled in the world, such a fiscal regime routinely requires the weakening of the state’s capacity for economic and social action, threatening its day-to-day functioning. The scandalous and denounced statements made by the current Economy Minister of Bolsonaro, Paulo Guedes, a truthful and spiritual representative of a significant part of the aforementioned elite, on the excesses and lack of frugality of the poor, serve as an authentic illustration of this point.

Certainly, the 2020 pandemic crisis imposes a significant increase on public expenditure – especially with the limited, yet relatively important emergency benefit paid by the country despite the wishes of the Federal Government. It reopens in the country the discussion on many subjects such as economic policies, state expenses and economic induction, currency issuance; which reflectsthe recent controversies between orthodox and heterodox economists highlighting the debates over Modern Monetary Theory (MMT) in Brazil and around the world. From the start, the wide political front of the upper class, clustered around an austere outlook, kept a firm position in defending the deepening of the very same hard-neoliberal economic program in the post pandemic era. They actually wish to double the stakes: giving the Central Bank full autonomy, a Calamity Constitutional Amendment Proposal (“PEC da Calamidade”), an Emergency Constitutional Amendment Proposal (“PEC Emergencial”), extensive tax and administrative reforms, new and more aggressive privatizations.

In any case it must be said: painted in red or blue, yellow or green, the implementation, maintenance and continuous intensification, throughout this period, of these harsh fiscal adjustment measures in Brazil created its the following reality, evidenced in data: scarce results, a stagnant country and, even more flagrantly contradicting the orthodox narrative, a growing gross debt – which, from 52.29% of GDP in January 2011, reaches almost 90% in March 2021.

The new moment of Capitalism in Brazil and its political challenges

Facing such catastrophic reality, harshly politically aggravated by a far-right government, the progressive political forces have been testing numerous proposals to overcome stagnation and its effects on social majorities and political minorities. The austere economic policy is to blame for the hole that Brazil  finds itself in, it is stated, and, based on this diagnosis (to a large extent correct, as we have just seen), several developmental proposals have been resumed; the case for the “return of the state”. 

Nevertheless, in order to properly frame the feasibility of these proposals, it is imperative to better qualify the cited diagnosis, which tends to underestimate or simply disregard altogether social and political causes and consequences of such an economic framework. Analytic errors lead to action errors. Therefore we must ponder the limits of this critique in favor of a post-pandemic “new economy”.

First of all, because our developmentalist colleagues (they be soft or hard developmentalists) are prone not to pay close attention to structural problems of Brazilian stagnation: a subordinated insertion in the international division of labor and production, dependence on commodities production and exports mostly relying on Chinese market demand (or lack thereof, for that matter), chronic shortage of public and private investments, stagnant productivity and low-skilled labor force which in large extent favors the proliferation of the aforementioned social and economic structures.

Secondly, and perhaps even more bluntly, because they also disregard the social and political character – class related – of the state and its structural role in Capitalism. This is particularly clear in Brazil under its current conjuncture, where the austerity dogmas are being applied as a powerful ideological tool on political offensives by certain sectors and class groupings that I have named before as a “wide front” – uniting bolsonaristas and anti-bolsonaristas – around a consensus regarding this economic status quo, in which they have a united interest and around which they are consolidating.

The paradox that brings us to yet another “lost decade” lies in the encounter of economy, politics and society: it seems that the country’s political and economic elites have definitely chosen the path of brutally enforced management, leaving little to no room for new attempts at social agreements, of a society living under a perennial crisis where the “profitable” management of a scenario of economic stagnation, recession and misery indicates the “new moment” of Capitalism in Brazil.

Finally, the question that remains to be answered is: which classes, actors and social sectors are willing to serve as political foundation for the desired “return of the state” in a post-pandemic Brazil? Our much needed and important plans for economic action. resistance and dismantling of the current situation may be in vain unless they are accompanied and supported by a new and concrete effort to (re)organize popular forces. Such an effort requires, given 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. 

Edemilson Paraná is a Social Scientist and professor at Federal University of Ceará (UFC). Author of ‘Digitalized Finance: financial capitalism and informational revolution’ (Brill, 2019/Haymarket, 2020) and ‘Money and Social Power: a study on Bitcoin’ (Brill, forthcoming).

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