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August
5, 2002
The Most
Important Election of 2002?
Lula, the Left,
Americans and Brazil
by Norman Madarasz
South America is being shaken economically. Argentina's
banking system has all but collapsed: money has become a scarce
item, indeed, even after devaluating to three-quarters of its
previous worth. Venezuela, having survived a coup d'etat in April,
braces for the permanence of its democratic institutions--notwithstanding
its leader. After years of Fugimori's hard line rule, Peru is
now bursting at the seams as a president actually seems committed
to righting social ills, though with State coffers empty. Uruguay
attempts to keep afloat with its sinking currency. And Ecuador
has already been dollarized; Chile, a special case since '73;
Colombia, the banality of a 35-year-long war...
And in the middle of it all stands South
America's largest economy, Brazil. With its currency now hovering
at 3-3.4 for a dollar, the Brazilian real--now more appropriately
called the 'irreal'-- has lost a third of its value in the last
year, an increase only slightly below the 1999 devaluation that
bade farewell to any illusions behind the experiment of pegging
local currencies to the dollar.
Still, the rabid speculation on the currency
and vacillating financial vulnerability has more of a political
reason than an economic one. This is because presidential elections
in Brazil are set for October 6, and leftwing candidate, Luiz
Ignacio Lula da Silva of the Partida dos trabalhadores (PT) is
ahead. Correction: he is still ahead. Steve Cobble, a political
analyst and Associate Fellow at the Institute for Policy Studies
has contributed a thoughtful and lucid article on the subject
to The Nation magazine (dated August 5).
To be sure, the article is timely. Despite
all its exoticism, Brazil still remains little known in North
America. It is Latin America's largest nation and has been by
far its largest economy (though its gross GDP has now been surpassed
by Mexico). While the elections are three months away, the international
press is observing the build-up to the elections most attentively.
With the currency crisis becoming ever more acute, it is still
unclear whether Lula and the PT can keep sheltering themselves
from its public fallout. To top things off, Treasury Secretary
O'Neill arrives in South America on Sunday August 4 to visit
Argentina, Uruguay and Brazil.
Cobble has addressed his stirring plea
to the American progressive community on ways to support the
PT, though Brazilian law prohibits all candidates and parties
from receiving foreign funding. The reasons for which the PT
should be worthy of such help are clear enough. Through its fifteen
some years of existence, the PT has remarkably kept the reputation
of an honest party. Some critics boast that it is the luxury
only a party remaining perpetually in the opposition can afford.
Others would counter that in a political system carpeted with
thieves, white-collar crime only mildly declines with partial
power.
Cobble's piece is relatively short, which
means there remain important issues necessarily left unattended.
Notwithstanding its concision, I would add that the predominantly
"ideological" angle of the article somewhat skews the
stakes of these elections and Brazil's role as a major continental
player.
Cobble first provides a brief description
of the geopolitical history of Brazil, particularly highlighting
U.S. positions on preceding elections. This sprightly introduction,
in which he expresses hopes for a Democrat victory in the US
this fall, is followed by a three-point action plan for the American
progressive community to take regarding the Brazilian elections.
His observations and analyses converge into one key phrase: "our
goal is not to intervene in Brazilian elections; it is to keep
powerful corporate actors and their allies from intervening to
subvert Brazilian democracy".
The criticism I hold of Cobble's piece
deals especially with the dominance of the ideological tone over
the economic one. By ideological, I mean that Cobble solely focuses
on the objective of the political posture of the PT. It most
certainly is a leftwing party, headed by the former head of the
Metalworkers' Union, Lula himself. The party actually developed
concurrently to Solidarisnosk (Solidarity) in Poland in the late
seventies. At that time, Brazil was ruled by a military junta,
and had been by a series of them after democracy was overthrown
in 1964. A putsch by the Air Force had been in the plans for
a considerable amount of time. In 1954, it was deferred in extremis
by the dramatic suicide of President Getulio Vargas. But in 1964
as then-president Joao Goulart prepared to press through Congress
with a series of major land reform laws, the military seized
the country's democratic institutions.
Since folding to public demonstrations
for the return to democracy in 1985, Brazil is now moving into
its fourth consecutive presidential elections. Much has been
written about Chile's democratic tradition, but Brazil has proved
by far to be the Cone's most durable democracy.
After surviving the debt crisis, Brazil's
most discomforting economic woe in the early nineties was spiraling
inflation. In 1994 when current President Fernando Henrique Cardoso
of the Brazilian Social-Democratic party, passed the "Plano
real", he replaced the existing "cruzero" by basically
pegging the "real" to the dollar. Such moves to stabilize
inflation were particularly encouraged by the IMF and Bill Clinton's
staff of economic planners. The aims of this policy, despite
how they may now appear in hindsight, were in fact oriented at
increasing an emerging market's capacity at modernizing its industrial
sectors by increasing its ability of importing costly foreign
technology.
The downside to such flexibility is that
the export market suddenly changes qualitatively. From an emerging
market, a country like Brazil was propelled to first-world status
through the cost of its products on the international market.
A readjustment of the real was thus impending if only to counterbalance
the relative weakness of Brazilian industry faced with the big
players. That's because a country does not bridge the gap between
'emerging market' to 'first world power' as easily as doctrinarian
advocates of neo-liberal globalization contend. Yet for the sake
of re-election, President Cardoso overstretched the real's critical
mass by holding firm on its peg to the dollar. Only weeks after
his re-election, won precisely on the grounds of Brazil's sparkling
economy, this resulted in the real being devaluated to counter
a massive stock market collapse and capital flight.
That was only the early sign of the failure
of the "Washington Consensus". The term refers, of
course, to the apparent shift in U.S. policy toward Latin America
as heralded by Bill Clinton. Under its terms, the U.S. adopted
a purely business relationship--with the exception of Colombia
and, to a lesser extent, Bolivia--with Latin America.
Brazil's current vulnerability lies in
its isolated position with respect to the powerful economic community
blocks of the world. Once conceptualized as a "pivotal"
country, it has been and remains the driving force of the South
American free trade zone, the Mercosul (in Portuguese). What
remains of the free zone as the other members (Argentina, Uruguay,
Paraguay) suffer the collapse of their economies is really an
open question. The immediate backlash of their crises is on Brazil's
trade deficit. Its economy barely grew in 2001 at 2%, a depressing
level for a trade zone containing an estimated 50 million middle
class consumers, whose purchasing power nonetheless remains under
stress.
Within this international scenario, Brazil
remains committed to a democratic system. And such a system,
and its promises of social reform, holds a powerful place in
the heart of the Brazilian people. That reform has been slow
is largely an internal factor. President Cardoso's team, however,
has succeeded in driving a wedge into corruption where others
have only secured it. Still, to keep power Cardoso was forced
to seek alliance with unsavory parties, which has ultimately
held his reformist dreams in check.
Internationally, ever since assuming
power the Republican government in the U.S. has continually stirred
up tensions with Brazil, if only through mishaps. In the early
weeks of Bush's presidency, though, President Cardoso demonstrated
his diplomatic flair by maneuvering a deal between China and
the U.S. on the fallen spy plane the Chinese refused to release
from their territory. A swift thank you followed, but the Bush
proposal for the Free Trade Agreement of the Americas did not
reflect Brazil's vision for economic partnership. And the recurrence
of American protectionism on steel and its massive agricultural
subsidies has not sat well with Brazilian parties across the
board.
This is because with its population of
173 million, Brazil is very close to being a big league player.
Still, it can only fall short in trying to make it on its own.
Earlier this year, a possible rapprochement between Brazil and
France had lain on the horizon as opinion polls were citing Lionel
Jospin as successor to Chirac and the country's second Socialist
president.
That was not to be. Brazil's leftwing
party is now quite alone on a terrain if not populated by wolves
then at least deeply lacking in possible alliances.
This is the context in which the PT is
calling for the Brazilian people's vote. Internally there is
a strong desire and need for change. Unfortunately, there is
no candidate as much of a leader as Lula in the fray. I say "unfortunately"
not because Lula would not be "prepared" to lead the
country, as many professedly astute voters believe. It is unfortunate
because if Lula is not elected, then chances of profound reform
will be postponed yet again. And with the growing attack on the
currency, a chance might be lost for another generation. In a
country chocked with urban violence, this may well prove to be
catastrophic.
The current presidential elections have
19 official candidates. They have been filtered down to four,
soon to be squeezed again to three. As in other presidential
systems of this kind, lying somewhere between the French and
American parliamentary democracies, by the time the candidates
get ground down to two for the second round many political alliances
formed will have formed.
The questions facing the PT are delicate.
In a desire to reassure Brazilians that its purpose is first
and foremost to create consumer incentives to boost local industries,
its commitment is to create jobs and growth. Its most popular
promise is to massively raise the minimum wage and place priorities
on education. Yet faced with international pressure, the PT has
moderated a number of its promises. This has had an ironic though
not surprising effect, given that its strongest supporters are
Brazil's 70 million impoverished "under-class". When
the PT appeals to a larger audience, its standing in opinion
polls decreases. Judging by recent polls if they are at all reliable--and
like polls in any country they are open to skeptical interpretation--,
the PT seems to lose the votes it gains by fine-tuning its discourse
to a more "moderate" pitch. As the PT is renown for
gathering more of the nation's brains than any other party, party
strategists must be wondering at what political cost election
is still worth if the party folds to international pressure on
its economic policies.
The progressive community in the U.S.,
Canada and Europe admire the PT for good reason. They are essentially
the only party left from a generation ago who have not watered
down their social commitment to the point of libeling the term
"progressive". Neither Blair, nor Clinton, nor McDonough,
Shroeder, or Jospin for that matter were comfortable with the
heritage they increasingly came to misrepresent -- which is assuming
the first two ever embodied it at all.
The PT rank and file emerges from the
industrial ABC region of Sao Paulo State. In the southern regions
of the country it appeals to the populations descending from
Northern European immigrants. The real enemies of the party,
though, are the large landowners of the northeastern states,
who maintain disproportionately large representational power
for their meager numbers.
Moreover, criticism of American policy
toward Latin America is not the monopoly of the PT. In a strange
twist of fate, after solidly supporting the 1964 coup d'etat,
the U.S. later saw itself sidelined as an economic player. Though
rightwing, the military was no less nationalist. And let there
be no mistaking the meaning of this: populism is free of political
stripes. Pleading to nationalism is the populist's strongest
card. But populism rarely amounts to reform. The project to which
the PT is committed is all but populist. Its reform platform
is squarely equal to a progressive vision.
Under the military dictatorship, political
populism translated economically into a closed country and sealed
market. The country became a quasi-autonomous unit on many fronts,
until president Cardoso's liberalist policies, coinciding with
Clinton's 'soft imperial' Washington doctrine, opened up the
country to foreign imports and investment. That the Brazilian
political class had no choice over this matter should be borne
in mind. Brazil had reached double-digit growth rates throughout
the seventies with the ISI system (Import-substituting industrialization).
But with mounting debt, ISI showed signs of exhaustion. To continue
such spectacular growth, industrialists had to export more broadly,
which meant opening the country in turn to imports. Since then,
debt has only increased. Though Brazil's economy grew by 4.2%
in 2000, its debt servicing costs Brazil $ 25 billion yearly,
calculated on a real trading at 2.5 for $1 US.
And then there are Brazil's banks. The
PT intends fully to move toward restructuring banks, though gradually.
Brazil's banks are among the most profitable in Latin America.
Due to IMF policy, they have also some of the highest lending
rates in the world, which is basically an impediment to the development
of small and medium local businesses. Under the gentlemanly mood
reigning between the semi-independent Central Bank, the IMF and
private banks, the PT must move carefully and transparently to
assure their creditors of the fruits gained by reducing the prime
lending rate--even at the risk of causing inflation so long as
inflation in turn stimulates productivity and increases salaries.
As things stand now, inflation is low but persistent, without
any substantial increase in salaries, let alone any residual
power of the currency internationally. Nonetheless, Brazilian
banks have been agitated at the PT's stances. In the end, they
may turn out to have been the main instigators behind the present
currency speculation.
These economic indicators make up the
knowledge without which it is impossible to cheer for a PT victory.
A PT government will be a full player, like Cobble indicated,
in a fair global trade system. Yet it cannot do so alone. And
at this point the American progressive community--and for the
record, Canada's -- is simply too weak and profoundly lacking
in power to be of any help to the PT.
The result is that Cobble's prescriptions
are merely promissory notes. The North-American progressive community
should have already had a strong position on economic partnership
with Brazil. But as union workers in the steel, sugar and tobacco
sectors have shown, and as workers in the fruit, especially orange
juice, and beef sectors have felt, Brazil often appears more
threatening to middle and lower class Americans and their jobs
than to the upper classes, for whom Brazil's bond market is a
sure source of income.
It is unclear how America's progressive
community can deal with this situation as predominantly critical
voices on globalized free trade seem to prevent enough research
and press exposure to cover the powerful sides of Brazilian life.
Moreover, Paul O'Neill's statements on American television on
July 28 are completely out of line. Since Mr O'Neill has proved
useless on saying anything about American plutocratic trends
as the background to the market's downward turn, it is obviously
easier to prod Brazil's oligarchy. The human costs, however,
may not be the same.
It is in light of the economic instability
into which a PT victory may throw the country that American progressives
should be putting the questions of business involvement first.
Unlike Venezuela, Brazil has a striving and vibrant economy,
and large consumer base. Destabilizing its leadership has nothing
to do with private profiteers trying to get their hands on the
oil booty. On the other hand, undue social instability could
disturb the country's democratic institutions. If that's the
case, the American progressive community will have to avow that
boisterously raising voices is not enough.
If it's a matter of legitimating the
PT according to its socialist ideals no matter the cost of necessary
alliances and compromises, North American progressives may in
fact have to face the fact that they have much work to do at
home before adequately representing situations abroad.
So how to go about an informed and insightful
strategy regarding the Brazilian elections? As a prescription
to the powerful, it is easy: Mr O'Neill had best mark his words
during his current visit to the region if the Administration
does not want to wind up with a region profoundly hostile to
U.S. foreign economic policy.
But how about to those North Americans
who do not hold power? How can we prevent uttering and/or muttering
statements about the southern countries that ultimately only
serve the business interests at home we are so determined to
expose as the exploitative and self-serving interest of shareholder
monopoly capitalism?
For one thing, trying to forge foreign
policy for Latin America by speaking in the name of the progressive
community, while still remaining tied to the Democratic party,
requires facing a moment of truth. Does Steve Cobble favor eliminating
trade barriers, for one? If so, that's counter to the Democrat's
overall position (and to Canada's Liberal party), which is why
splitting ties from it should be stimulated even further.
Clinton's Washington Consensus now appears
as quite unreal in its expectations. One cannot expect a local
currency to be pegged to the dollar while still defending the
sovereignty of local businesses that are continually under pressure
to comply with the game rules set by northern countries. Moreover,
the wealth of America's consumer market and its productive power
are daunting for any individual country to confront on its own
when based in the trade principles set out by the OECD and WTO.
In the past, even the US economy would
have been at the mercy of other powerful currencies were it not
for the Federal government massively funding its industrial sector--identical
to the way China is now doing. Maintaining American hegemony
over continental trade, at the cost of stifling the growth of
southern countries is an agenda on which the Democratic Party
differs little from the Republicans.
On the other hand, if the North American
middle class's commitment to globalization is not merely blind
faced and hypocritical, it must seek out analyses from other
points of view on how to apply the principles of free trade on
internationalist grounds. If the middle class is not satisfied
in upholding the imperialist aims of the North America upper-classes,
then we must be able to usher in a cohesive and collaborative
team of politicians, economists, entrepreneurs, investors and
intellectuals to spread the purpose of novel ties and innovative
policies toward the continental economy. The people in the south
are expecting nothing else from our privileges.
In the end, despite the philosophical
glamour of watching a leftwing party elected to govern Brazil,
North-American spokespersons for the progressive community will
have to move much further left and cut its ties with the Democrats
and Liberals if they ever hope to be convincing to southern nations
as to the effectiveness of their long-term commitment to help
pull the region out from economic slumber and into a more affluent
partnership.
Norman Madarasz
is a Canadian philosopher currently living and working in Rio
de Janeiro. He welcomes comments at normanmadarasz@hotmail.com.
Today's
Features
David Krieger
Nuclear
Apartheid
Gilad Atzmon
The End
of Innocence
Gavin Keeney
Everybody's
a Critic
Alexander Cockburn
Can the Times' Jeff Gerth
Save Dick Cheney?
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