Introduction
The Brazilian working class is facing the
most savage assault on its living standards in over a decade. And it is not just the industrial workers
who are under attack. The landless
rural workers, public and private salaried employees, teachers and health
professionals, the unemployed and the poor are facing massive cuts in income,
jobs and welfare payments.
Whatever gains were made between 2003–2013 will be reversed. Brazilian
workers face a ‘decade of infamy’. The
Rousseff regime has embraced the politics of “savage capitalism” as personified
in the appointment of two of the most extreme advocates of neo-liberal policies
The
“Workers Party” and the Ascendancy of Finance Capital
In early December 2014, President
Rousseff appointed Joaquin Levy as the new Finance Minister - in effect the new
economic czar to run the Brazilian economy. Levy is a leading member of the Brazilian financial oligarchy. Between 2010-2014 he was president of
Bradesco Asset Management, an asset arm of the giant conglomerate Bradesco,
with more than $130 billion dollars under management. Since his doctoral days at the U of Chicago, Levy is a loyal follower of neo-liberal
supremo Professor Milton Friedman,
former economic adviser to Chilean military dictator Augusto Pinochet. As a former top official in the
International Monetary Fund (1992–1999), Levy was a strong advocate of the
harsh austerity programs which a decade later impoverished southern Europe and
Ireland. During the Presidency of
Henrique Cardoso, Levy served as a top economic strategist, directly involved
in the massive privatization of lucrative public enterprises – at bargain
basement prices – and the liberalization of the financial system which
facilitated the illicit financial outflow of $15 billion a year. Levy’s presence as a prominent member of
Brazil’s financial oligarchy and his deep, longstanding ties to international
financial institutions is precisely the reason President Rousseff put him in
charge of the Brazilian economy. Levy’s
appointment is part and parcel of Rousseff’s embrace of a new strategy of vastly
increasing the profits of foreign and domestic finance capital, in the hope
of attracting large scale investments to end economic stagnation.
For President Rousseff and her mentor,
ex-President Lula DaSilva, the entire economy must be directed to gaining the
“confidence” of the capitalist class.
The social policies which were
implemented earlier are now subject to elimination or reduction, as the new
financial czar Joaquin “Jack the Ripper” Levy, moves forward to implement his
“shock therapy”. Deep and comprehensive
cuts in labor’s share of national income is at the top of his agenda. The objective is to concentrate wealth and
capital in the upper ten percent in hopes that they will invest and increase growth.
While Levy’s appointment represents a
decidedly turn to the extreme right, the economic policies and practices of the
previous twelve years laid the foundations for the return of a virulent version
of neo-liberal orthodoxy.
The
Economic Foundations for the Return of Savage Capitations
During the electoral campaign in 2002,
Lula DaSilva signed off on an economic agreement with the IMF which guaranteed
a budget surplus of 3%. Lula sought to
reassure bankers, international financiers and multi-nationals that Brazil
would pay its creditors, increase foreign reserves for profit remittance and illicit
financial flows overseas.
The Lula regime’s adoption of
conservative fiscal policies, was accompanied by his austerity policies,
reducing public employees’ salaries and pensions and providing only marginal
increases in the minimum wage. Most of
all, Lula supported all of the corrupt privatizations which took place under
the preceding Cardoza regime. At the
end of Lula’s first year in office, 2003, Wall Street hailed Lula as the “Man
of the Year” for his “pragmatic policies” and his demobilization and
de-radicalization of the major trade unions and social movements. In January 2003, President Lula Da Silva
appointed Levy as Treasury Secretary, a position he held until 2006 – the most
socially regressive period of the Da Silva Presidency. This period also
coincided with a series of enormously lucrative multi-billion dollar corruption
scandals involving dozens of top PT officials in the Lula regime receiving
kickbacks from leading construction companies.
Two events in the middle 2000s allowed
Da Silva to moderate his policies and introduce limited social reforms. The commodity boom – a sharp increase in the
demand and prices of agro-mineral exports filled the coffers of Treasury. And increased pressure from the trade
unions, rural movements and the poor for a share in the economic bonanza led to
increases in social spending, wages,
salaries and easy credit without affecting the wealth, property and privileges
of the elite. With the economic boom,
Lula could also satisfy the IMF, the financial sector and the business elite
with subsidies, tax breaks, low interest loans and lucrative “overpriced” state
contracts. The poor received 1% of the
budget via a “family allowance” a $60 dollar a month handout and low paid labor
received a higher minimum wage. The cost of social welfare was a fraction of
the 40% of the budget that the banks received in payments of principle and
interest payments on dubious public debt incurred by previous neo-liberal
regimes.
With the end of the boom, the government
of Rousseff has reverted back to Lula’s orthodox policies of 2003–2005 and
re-appointed Levy to carry them out.
Levy’s
Shock Therapy and Its Consequences
Levy’s task of re-concentrating income,
raising profits and reversing social policies is much harder in 2014–2015 than
it was in 2003–2005. Mainly because,
earlier, he was merely continuing the policies of the Cardoso regime –
and Lula promised the workers it was only temporary. Today Levy must cut and slash gains that
workers and the poor take for granted. In
fact in 2013–2014 mass urban movements pressed for greater social expenditures
for transport, education and health.
To advance Levy’s shock therapy ,at some
point, repression will be necessary, as was the case in Chile and Southern
Europe when similar austerity policies depressed incomes and multiplied
unemployment.
Levy proposes to rescue the interests of
finance capital by taking several crucial measures which will be in line with
the agenda of Wall Street, City of London and the Brazilian financial moguls. Taken in their entirety, Levy’s financial
policies amount to “shock treatment” – harsh,rapid economic measures applied
against workers living standards, equivalent to electric shocks to patients
with disorders, applied by deranged psychologists who claim that “pain is
gain”, but more frequently than not, turn patients into zombies or worse.
Levy’s first priority is to cut and slash
public investments, pensions, unemployment payments and public sector salaries. Under the pretext of “stabilizing the
economy” (for the financial groups) he will destabilize the household
economy of tens of millions. He will
rescind tax breaks for the mass of consumers buying cars, household appliances
and ‘white goods’, thus increasing the costs to millions of working class
households or pricing them out of the market.
Levy’s purpose is to unbalance household budgets (increase debt
over income) in order to increase the state budget surplus and ensure full and
prompt debt payments to creditors like his own Bradesco conglomerate.
Secondly, Levy will “adjust” prices. More specifically end price controls on
fuel, energy and transport so that the financial oligarchs with millions of
shares in those sectors can jack-up prices and “adjust” their wealth upward
into the billions of dollars. As a
result, the working and middle class will have to spend a greater share of
their declining income for fuel, transport and energy.
Thirdly, Levy will probably let the
currency weaken to promote agro-mineral exports under the guise of greater
“competitiveness”. But a cheaper currency will increase the cost of imports,
especially, of basic foodstuffs and manufactured goods. The de facto devaluation will hit hardest
the millions who cannot hedge their savings and favors the financial
speculators who will capitalize on currency movements. And comparative studies demonstrate that a
cheaper currency doesn’t necessarily increase productive investments.
Fourthly, Levy is likely to claim that
energy shortfalls due to drought, which has reduced Brazil’s hydropower dams,
requires “reform” of the energy sector, Levy’s euphemism for privatization. He
will propose to sell-off the
semi-public billion dollar petroleum giant Petrobras,and accelerate the
privatization of offshore exploitation sites, at terms favorable to big
investment banks.
Fifthly, Levy is likely to slash and burn
environmental and business regulations, including those affecting the
rain-forest, labor and Indian rights, to facilitate the easy entry and fast
exit of financial capital.
Levy’s “shock therapy” will have a
profound social and economic impact on Brazilian society. Every indication, from past and present
experiences, is that in every country “Chicago Boys”, like Levy, have applied
their “shock” formula, has resulted in profound economic recession, social
regression and political unrest.
Contrary to the expectations of President
Rousseff, cuts in credit, salaries and public investment will depress
the economy – and send it from stagnation into recession. Retrograde budget balancing lessens demand
and does not induce productive capital flows. The most dynamic growth sectors in manufacturing, the car industry, will
be sharply and adversely affected by the increase in taxes on purchases. And the same goes for appliances.
Heretofore the expansion of public
investment has been the main driving force of even the current meagre growth. There is no rational reason to believe that
vast flows of private capital will suddenly take up the slack, especially in a
shrinking market. This is especially
true, if as is likely to happen, class conflict intensifies from across the
board reductions in wages, salaries and living standards.
Levy, like all free market fanatics, will
argue that recession and regression are short-term, necessary and ,will succeed
“in the long run”. But in all
contemporary countries pursuing his shock formula, the result has been
prolonged regression. Greece, Spain,
Italy and Portugal are in the seventh year of austerity induced depression and
their public debt is growing.
The
Real Effective Consequences of Shock Therapy
We have to discard the ideological
“stability and growth” claims of the Levyites and look at the real results
of the policies he promises.
First and foremost, inequalities
will increase because whatever income gains ensue will be concentrated
at the top. Government deregulation and
fiscal and exchange rate policies, will deepen the imbalances in the economy,
favoring creditors over debtors, foreign finance over local manufacturers,
owners of capital over wage workers, the private sector over the public.
Levy will indeed “secure the confidence
of capital” because what is dubbed as “investor confidence” rests on an
unimpeded license to plunder the environment, reduce wages and exploit a growing reserve army of
unemployed.
Conclusion
Levy’s shock therapy will heighten class
tension and inevitably result in the break-down of the social pact between the
so-called Workers Party regime and the trade unions, the landless rural workers
and the urban social movements.
Rousseff and the leadership of the
self-styled “Workers’ Party” regime, faced with economic stagnation resulting
from the decline in commodity prices and the decision of private capital to withhold investments, could have chosen
to socialize the economy, end crony capitalism and increase public
investment.Instead it capitulated. Rousseff has recycled the orthodox
neo-liberal policies which Lula implemented during the first two years of his
regime.
Instead of mobilizing workers and
professionals for deeper structural changes, Rousseff and Lula Da Silva are
counting on the “left-wing” of the PT to complain, criticize and conform. They are counting on the co-opted leaders of
the trade union confederation (CUT), to hyperventilate and confine themselves
to inconsequential symbolic protests which will not disrupt Levy’s “shock
therapy”. However, the scope, depth and
extremism of Levy’s so-called adjustment and stabilization program will provoke
general strikes, first and foremost in the public sector. The cutbacks in the
auto industry and rise in unemployment, will result in job action in the
manufacturing sector. The cuts in
public investment and rise in the costs of transport, health care and education
will revive the mass urban movements.
Within a year, Rousseff and Levy’s shock
policies will convert Brazil into a boiling cauldron of social discontent. Lula’s pseudo-populist gestures and empty
rhetoric will have no effect. Rousseff
will not be able to convince working people to accept Levy’s class biased
“austerity” program, his incentives “to gain the confidence of international
markets” and his incomes policies shrinking incomes of the vast majority of
working people.
Levy’s policies will deepen the
recession, not “re-awaken the animal spirits of entrepreneurs”. After a year of “more pain and no gain”
(except for higher profits for financiers and agro-mineral exporters),
President Rousseff will face the inevitable negative political outcome of having lost the support of the
workers, middle class and rural poor without gaining the support of the
business and financial elite – they have their own reliable party leaders. Once having put in place his radically
regressive free market policies, and having provoked massive popular
discontent, Levy will resign and
return to the presidency of Bradesco, the multi-billion dollar investment
fund, claiming “mission accomplished”
Rousseff might replace Levy and try to
‘moderate’ his ‘shock therapy’. But by
then it will be too little too late. The
Workers’ Party will end up in the dust bin of history. Rousseff’s decision to appoint Levy as economic czar is a declaration
of class war. And in order to win the class war, we cannot exclude that the
radically regressive policies will be enforced by state violence
– the repression of mass urban protests, the savage dislodgement of peaceful
landless rural workers occupying fallow lands.
The “Workers’ Party” regime’s turn from
“inclusive neo-liberalism” to Friedmanite free market extremism will radicalize
and polarize Brazilian society. The
oligarchy will push to remilitarize civil society. This in turn, will spur the growth of class
conscious social movements, like those that ended twenty years of military
rule. Perhaps this time, the social
upheaval may not end in a liberal-democracy; perhaps the coming struggle will
bring Brazil closer to a socialist republic.
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