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Eamonn Fingleton gives a stunning account of how the elite press – the Wall Street Journal, The Economist, the New York Times and Washington Post - pilloried US autworkers while systematically concealing the hidden subsidies which have allowed Japan and Korea to destroy Detroit. All this with the connivance of the US government. Also in our latest newsletter: Michelle Obama comes to Merced. Bill Hatch, the Balzac of the Central Valley, gives an uproarious account of Michelle’s state visit to UC’s new campus. Get your new edition today by subscribing online or calling 1-800-840-3683 Contributions to CounterPunch are tax-deductible. Click here to make a donation. If you find our site useful please: Subscribe Now! CounterPunch books and gear make great presents.
How the U.S. Press Helped Destroy the Auto IndustryOrder CounterPunch By Email For Only $35 a Year !
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Today's Stories June 12-14, 2009 Mike Whitney June 11, 2009 Kathy Kelly / James Bovard Tristan de Bourbon Dave Lindorff Kevin Zeese Ralph Nader Harvey Wasserman Nicole Colson Mark Weisbrot Dan Bacher Website of the Day June 10, 2009 Ismael Hossein-Zadeh Jennifer Van Bergen / Douglas Valentine Kathy Kelly Paul Craig Roberts Rev. William E. Alberts Peter Lee Carol Miller Emily Ratner Robert Weissman Dave Lindorff Website of the Day June 9, 2009 Winslow T. Wheeler Mike Whitney Stan Cox Sibel Edmonds Jonathan Cook David Macaray Robert Jensen Nadia Hijab Mark Weisbrot Website of the Day June 8, 2009 John Ross Paul Craig Roberts Franklin C. Spinney Franklin Lamb Uri Avnery Jonathan Cook Eric Toussaint Jim Goodman Norman Solomon Reza Fiyouzat Website of the Day June 5 -7, 200 Alexander Cockburn George Galloway Paul Craig Roberts Jennifer Loewenstein Franklin Lamb Mike Whitney Andy Worthington Missy Comley Beattie Farzana Versey Stanley Heller John V. Whitbeck Robert Weissman Lee Sustar Dave Lindorff William Blum Ernest Callenbach / Greg Moses Ron Jacobs David Yearsley Tim Stelloh Belén Fernández David Ker Thomson Karyn Strickler Christopher Brauchli Charles R. Larson Kim Nicolini Lorenzo Wolff Poets' Basement Website of the Weekend June 4, 2009 Arno J. Mayer Mike Whitney Gareth Porter Ayesha Ijaz Khan Mouin Rabbani Jordan Flaherty Adam Turl Nikolas Kozloff Yifat Susskind Website of the Day June 3, 2009 Paul Craig Roberts Kathy Kelly Alan Farago Franklin Lamb Bill Hatch Nadia Hijab Dean Baker Binoy Kampmark Manuel Garcia, Jr. Remi Kanazi Behzad Yaghmaian Website of the Day June 2, 2009 Uri Avnery Robert Weissman Conn Hallinan Gideon Spiro Roger Burbach Dylan Quigley Dave Lindorff Ray McGovern Belén Fernández Martha Rosenberg Willie L. Pelote, Sr. Website of the Day June 1, 2009 Pam Martens Yitzhak Laor Mark Weisbrot Ramzy Baroud Saul Landau Eugenia Tsao Afshin Rattansi Debra Sweet Abdul Malik Mujahid Bill Quigley John Wright Website of the Day May 29-31, 2009 Alexander Cockburn Patrick Cockburn Vijay Prashad Gary Leupp Ray McGovern Rannie Amiri Bill Hatch Chellis Glendinning, Stephanie Mills and Kirkpatrick Sale Phyllis Pollack David Yearsley Jean-Christophe Servant Dave Lindorff James McEnteer Missy Beattie James C. Faris David Macaray Harvey Wasserman Adam Federman David Ker Thomson Mark Seth Lender Stephen Martin Joseph Nevins Sophia Mihic Lorenzo Wolff Poets' Basement Website of the Weekend May 28, 2009 Joan Roelofs Paul Craig Roberts Ralph Nader Mouin Rabbani Joe Bageant James McEnteer Dedrick Muhammad Richard Morse David Macaray Harvey Wasserman Website of the Day May 27, 2009 Joanne Mariner Paul Craig Roberts Walden Bello Dave Lindorff Brian M. Downing Carlos Villarreal Nadia Hijab Adam Federman Laray Polk Isabella Kenfield David Michael Green Website of the Day May 26, 2009 Manuel Garcia, Jr. Mike Whitney Sharon Smith Marjorie Cohn Dean Baker Deepankar Basu Fred Gardner Jordan Flaherty Josh Ruebner Brian Cloughley Website of the Day May 25, 2009 Diane Christian John Ross Kenneth Hartman Uri Avnery Fred Gardner Cindy Sheehan Sen. Russell Feingold Sibel Edmonds Franklin Lamb Dave Lindorff Daniel Wolff Website of the Day May 22-24, 2009 Alexander Cockburn Michael Teitelman Mike Whitney Ray McGovern Sonia Cardenas / Clive Hamilton Conn Hallinan Fred Gardner Carlo Cristofori Dean Baker Rannie Amiri Andy Worthington David Macaray Nadia Hijab Franklin Lamb Ted Newcomen David Ker Thomson David Rosen Mark Weisbrot Robert Fantina Heather Gray Farzana Versey Chris Genovali Ron Jacobs Jay Diamond Dr. Susan Block Ben Sonnenberg David Yearsley Lorenzo Wolff Poets' Basement Website of the Weekend May 21, 2009 Jeffrey St. Clair / Paul Craig Roberts Chris Floyd Gerald Paoli Zach Mason Uri Avnery Andy Worthington Niranjan Ramakrishnan Norman Solomon Dave Lindorff Website of the Day May 20, 2009 Michael Hudson Gary Leupp Michael D. Yates Jonathan Cook Peter Lee Binoy Kampmark Peter Zinn William Loren Katz Gary Lapon Trudy Bond Website of the Day May 19, 2009 Kristoffer Rehder Mike Whitney Ray McGovern Vijay Prashad Mirjam Hadar Meerschwam Mustafa Barghouthi Andy Worthington Binoy Kampmark John Walsh David Macaray Website of the Day May 18, 2009 Dave Lindorff Abdul Malik Mujahid Jonathan Cook Ben Rosenfeld Patrick Cockburn Ralph Nader Stephen Soldz Eugenia Tsao Walter Brasch Roberto Rodriguez Charlotte Laws Website of the Day May 15-17, 2009 Alexander Cockburn Jeffrey St. Clair David Rosen Mike Whitney Bruce Page Jeremy Scahill Fred Gardner Tom Barry Mats Svensson Ramzy Baroud Mark Engler Mark Weisbrot Farzana Versey Ron Jacobs Hannah Wolfe Cal Winslow David Macaray Christopher Brauchli Mark Seth Lender Robert Fantina David Ker Thomson Stephen Martin Charles R. Larson Chase Madar Kim Nicolini David Yearsley Lorenzo Wolff Poets' Basement Website of the Weekend May 14, 2009 Michael Hudson Andy Worthington Paul Craig Roberts Jonathan Cook Ray McGovern Lance Selfa David Green Dave Lindorff Frida Berrigan Sue Udry Website of the Day May 13, 2009 Brian M. Downing Gareth Porter Robert Sandels Ricardo Alarcón Eric Walberg Dave Lindorff Deepak Tripathi William S. Lind Kevin Zeese Franklin Lamb Website of the Day May 12, 2009 Gary Leupp Richard Neville Wajahat Ali Dean Baker Franklin Lamb Norman Solomon Paul Craig Roberts Lisa M. Hamilton Bob Fitrakis / David Macaray Website of the Day May 11, 2009 Andrea Peacock Michael Hudson Patrick Cockburn Ralph Nader John Kelly Saul Landau Dave Lindorff David Michael Green Anthony Papa Paul Krassner Website of the Day
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Weekend Edition When the "Magic Moment" Turned to NightmareBrazil: More Dependent Than EverBy RENAUD LAMBERT In May 2008 the US economy had begun its decline, but in Brazil things still looked fine. President Luiz Inácio Lula da Silva reckoned that his country was experiencing a “magic moment”: after a 5.67 per cent rise in GDP in 2007, government morale was high. What was going on elsewhere didn’t matter; growth would continue “at its present rate for the next 15 to 20 years”. By October 2008 the international financial system was collapsing. But Brazil still wasn’t worried. “Up there [in the US] the crisis is a veritable tsunami. If it arrives here it will only be a little wave, not even big enough to surf on,” the president said reassuringly in a speech on October 4. A few months later, Luciano Coutinho, head of Brazil’s national development bank (BNDES), added: “Decoupling has, yes, taken place,”alluding to the theory that the growth of countries on the periphery of the world capitalist system had become independent of the shocks felt at its centre. Then came March 2009. When the wave did arrive, it brought a storm with it. The Bradesco bank’s estimates of GDP growth plummeted from more than 4 per cent in June 2008 to 2.5 per cent in December – and then to -0.3 per cent this April. Morgan Stanley has even predicted a 1.5 per cent contraction in the Brazilian economy, which would be its biggest setback since 1948. In the last quarter of 2008, Brazil’s industrial output dropped by 19 per cent. Eight hundred thousand workers lost their jobs between October and January (nearly 1 per cent of the workforce), and that doesn’t even begin to take account of job losses in the informal economy, which employs around 40 per cent of Brazilian workers. Half a million Brazilians have found themselves back in poverty or extreme poverty. The “magical moment” has turned into a nightmare from which Brazil will not emerge, according to its president in a speech on April 6, until “we ask God for the crisis to disappear from Europe, the US and Japan”. More soberly, the Financial Times concluded on March 11 that Brazil’s economic results meant an end to the debate about its immunity from global contagion. The myth of decoupling was over. None of this is surprising, though, given how much has been done in the past 15 years to increase the country’s dependence on foreign capital. One of the most significant developments has been the acceleration of foreign access to Brazil’s financial markets. This is all the more remarkable as it was made possible by sociologist-turned-president Fernando Henrique Cardoso, whose work aimed to “build a path to socialism” and the former trade unionist, President Lula. “Something Marx never imagined” In the late 1960s, Cardoso, who studied at the EHESS (Ecole des hautes études en sciences sociales) in Paris, rejected the idea that a country on the periphery could develop by means of foreign capital without increasing its dependence: “The system of domination reappears as an ‘internal’ force through the social practices of local groups and classes which try to promote foreign interests”. Twenty years later, first as finance minister (1993-4) and then president (1995-2002), he discovered that the world had changed. He told Mais! magazine in 1996: “We have something that Marx never imagined… Capital has very quickly become internationalised and today it has become abundant. Some countries are able to derive profit from this situation. Brazil is one of them”. Influenced by what he considered the successful economic stabilization of Mexico and Argentina achieved through neoliberal policies, Cardoso made opening up Brazil to foreign capital the centerpiece of his own plans. The aim was no longer to promote autonomous development by substituting local production for imports. It was to facilitate imports so that they reinvigorated competition and gave a spur to productivity. Cardoso set about changing Brazil in order to woo investors. Tariff barriers came down, exchange controls were freed up and the constitution revised to enable an ambitious program of privatizations to go through. Imports leapt by 52.7 per cent between the first and second half of 1994. As a result, many Brazilian businesses closed or had to go into partnership with foreign companies, which accounted for 70 per cent of Brazilian mergers and acquisitions between 1995 and 1999. Somewhat amazed by the brazenness of this denationalization programme, the pro-liberalisation Veja magazine observed that “the history of capitalism has rarely seen the transfer of control on such a scale in such a short period”. In 2000 Rubens Ricupero, secretary general of the United Nations Conference on Trade and Development, assessed the effects of economies opening up to foreign capital: “The commercial objectives of the multinationals and the objectives of the host economies do not necessarily coincide”. “Not necessarily” is something of an understatement. Under Cardoso, Brazil deindustrialized and the official unemployment rate almost doubled to reach 9 per cent. Meanwhile GDP didn’t get above 1 per cent. Opening up his country’s borders and relaxing exchange controls came at a price: Brazil’s balance of payments (value of exports minus the value of imports) fell from $10.5bn in 1994 to -$3.5bn just one year later. It had been in the black since 1980 but it was to remain in the red until 2000. Brazil became a dependent nation since, as Cardoso himself put it, “to overcome our deficits we need a constant influx of foreign capital”. Efforts to attract that capital redoubled in spite of its harmful effect on the economy. And yet deficits weren’t brought under control. Investors in Brazil are like investors everywhere: they want as significant a return on their investment as possible and they want to be able to repatriate those profits. Where foreign investment is insufficient to staunch the outflow of capital, foreign debt goes up; in Brazil’s case it rose from $150bn in 1994 to $250bn in 2002. In a manner reminiscent of the US financier Bernie Madoff, who recently showed that the old pyramid fraud was alive and well, Brazil came up with a “Ponzi scheme”, by which yesterday’s debts are paid off today with borrowing which fuels tomorrow’s debts. The difference was that while Madoff swindled mostly the rich, the Brazilian government got a whole nation to cough up, in particular through stratospheric interest rates and a raft of austerity measures. Perhaps this is unsurprising; when an economy is organized for the benefit of speculators, they tend to get preferential treatment. Brazil’s many high net-worth individuals quickly cottoned on to the fact that, with the interest rate so high, buying up debt securities was an enticing prospect. Many businesses have given up on productive investment. Development Cardoso-style became a synonym for financial development. Domestic debt rose by 900 per cent during his presidency, while investment stagnated and became more and more dependent on foreign money, especially in the field of technology. Cardoso was not the first to want to modernise Brazil, but he had the greatest impact. In 1998, The Economist reported approvingly that Cardoso had achieved in a little less than four years nearly as much as Margaret Thatcher had done in 12. His main opponent in Brazil, Lula da Silva, was less impressed; to him Cardoso was the “executioner of the Brazilian economy”. Idol of investors The election of Lula da Silva, a former “red” trade unionist, to the presidency in 2002 caused alarm. “Foreign investors had always wondered how Brazil would behave under a president from the left,” remembers Emilio Odebrecht, heir to the eponymous industrial empire. Lula had, after all, insisted during the 1998 presidential campaign (which he lost): “If it comes to paying interest or filling the stomachs of the people, I’m on the side of the people”. In the end though, according to Odebrecht, Silva’s election was “the best thing that could have happened to this country” . To the surprise and chagrin of militants in his own party, once he was president, Lula soon became the idol of the investors and the financial markets. At the time of his election, the Brazilian economy was dependent on a further loan from the IMF. As the Wall Street Journal explained on August 14 , 2002, “The IMF loan is structured to induce the leftwing presidential frontrunners, Luis Inácio Lula da Silva and Ciro Gomes, to continue the conservative economic policies of the outgoing president, Fernando Henrique Cardoso.” Was Lula already convinced that it was “impossible to govern without the support of the oligarchs” ? Perhaps. It’s certainly the case that he readily accepted governing on their behalf. Javier Santiso, an economist at the OECD, was delighted: “The transfer of power between Cardoso and Lula was a lesson in political elegance”. Those voters who had been hoping for a break with the past were doubtless less impressed by this display of refinement. In his speeches, Lula continued to defend the idea of economic sovereignty. (What did it matter that it was precisely due to his country’s economic dependence that it was able to take such advantage of a favorable international economic situation?) If capital was pouring in, it showed Brazil was “becoming its own boss”. But you can’t change a system and at the same time keep milking it. Brazilian exports grew at an average annual rate of 20 per cent in 2003-6, temporarily resolving the balance of payments problem. But those exports were stimulated by a new wave of direct foreign investments, which went from $10bn in 2003 (about 2 per cent of GDP) to the record level of $45bn in 2008 (or 3.5 per cent of GDP). In other words, these exports came at the cost of even deeper penetration of the Brazilian economy by foreign capital. You need to govern for all and not just for the poor, was Lula’s advice to his Bolivian counterpart Evo Morales on 16 January this year. It’s a recommendation he has taken to heart himself. And if the whiff of prosperity that the country has enjoyed has brought some relief for the working classes – thanks to social programs that are mainly based on handouts – it has transformed into a veritable avalanche of opulence for the speculators. In 2007, for example, the inflow of foreign currency linked to the export boom inflated the value of the Brazilian real by around 20 per cent relative to the dollar, while at the same time domestic debt securities enjoyed an annual interest rate of 13 per cent. Foreign investors (or Brazilians who had borrowed dollars abroad at relatively low interest rates) therefore benefited from a return on investment of more than 30 per cent at the end of the year. It’s hardly surprising that internal debt reached 160bn reals in January 2009 (over $680bn) or three times the country’s currency reserves, which the president boasts of as a sign of Brazil’s economic independence. In this arena all that has been achieved is further lining the pockets of the 20,000 Brazilian families who hold 80 per cent of debt securities. Servicing those debts eats up 30 per cent of the federal budget. Less than 5 per cent of that budget meanwhile goes on health and 2.5 per cent on education. When Lula accepted the status quo on coming to power, he also accepted its vulnerability. As Cardoso himself admitted: “If billions of dollars can enter Brazil, then they can also leave it” . In fact, in times of crisis, the periphery goes from a situation of dependence with regard to the centre to a state of total subjugation in view of its need of liquidity. And if currency movements can’t be depended upon to deliver in terms of development, then massive outflows can be relied on to weaken a country’s economy. Therein lies the paradox of dependence: you lose when the dollars come in and you lose again when they go out. Balance of payments sieve In the space of a few months, the collapse of the international financial system transformed the Brazilian balance of payments into a sieve through which money poured. Take the commercial balance: it has been declining since 2006 – the value of the real has meant that imports have been growing at a faster rate than exports – and this January it recorded its first deficit in 93 months. There’s no real sign of recovery in sight since the IMF predicts an 11 per cent fall in world trade in 2009. In conditions such as these, it becomes more difficult for Brazil to import the equipment on which its own output depends. Today, Brazil stresses that it has international reserves of around $200bn to reassure investors worried about the risk of a balance of payments crisis. It was negative in the last quarter of 2008 for the first time since the end of 2005, but with a deficit that was seven times greater, at $21bn, or 1.85 per cent of annual GDP. For the moment, Brazil believes it has a significant room for maneuver; its intervention rate was close to 11 per cent this March. However, according to the economist Paulo Henrique Costa Mattos, current liabilities could reach $600bn. With the majority of the world’s countries rushing to get themselves deeper into debt, there’s strong competition on the government bond market; rates will go up and the weight of debts will further press down on the balance of payments and on the shoulders of Brazilians. There’s nothing new about the phenomenon of dependence. In 1969, the Chilean foreign minister Gabriel Valdés told President Nixon: “Private investment has meant and does mean for Latin America that the sums taken out of our continent are several times higher than those that are invested… In one word, we know that Latin America gives more than it receives.” In the past, some governments (not only those on the left) defended autonomous development programs based on import substitution. Such projects were criticized by those who thought that, as they would be run by national bourgeoisies, they were doomed to failure. For those critics there was only one course: social revolution. The sociologist Cardoso was one of them. So, too, was the unionist Lula da Silva. If Silva had truly wanted to decouple the Brazilian economy when he came to power, he should perhaps have opted for something other than embracing his predecessor’s economic program. By failing to do so, he exemplified the transformation of a party of the Latin American left, a transformation which the OECD economist Javier Santiso described approvingly in these terms: “Expressions such as ‘class struggle’, ‘planned economy’ and ‘strategies of import substitutions’ have been replaced by others such as ‘democratic consensus’, ‘institutional consolidation’, ‘economic deregulation’ and ‘openness to the free market’.” And so that is Lula da Silva’s box of tricks for tackling Brazil’s current economic difficulties. The US is asked for more trade, and the Brazilians are asked to tighten their belts. And God is asked for a return to the economics of the centre. What about the foreign investors and the creditors at home? Nothing or very little is being demanded of them. When asked recently about who bore responsibility for the present crisis, the Brazil’s president replied: “We didn’t create the problem but we are part of the solution”. One has to wonder. Translated by George Miller. Renaud Lambert is a journalist. This article appears in the June edition of the excellent monthly, Le Monde Diplomatique, whose English language edition can be found at mondediplo.com. This full text appears by agreement with Le Monde Diplomatique. CounterPunch features two or three articles from LMD every month.
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