Lula, Brazil and the future of the Left

Chapter 4: Economic and Political Perspectives

When Brazilian workers and peasants celebrated Lula’s victory at the polls last year the surge in optimism was palpable. It is barely a year ago when Lula declared that Brazil was about to witness a ‘spectacle of growth in the days ahead.’ Today, the mood is very different. From the neo-liberal point of view the fist year of Lula has been a roaring success. In October 2003 the Brazilian daily Folha da Sao Paolo ran a front page report on a poll taken among an elite of Latin American financiers and corporate managers which chose Lula as ‘the best President in Latin America.’ Last year, helped by a weaker currency and rising world prices for primary commodities, Brazilian exports rose by 20%. This helped to turn the current account deficit, which peaked at 33 billion US dollars in 1998 into a surplus of $4 billion in 2003. This in turn provided the government with the required dollars to meet the interest payments on the public debt, which in turn led to an improved risk certification on the international investment markets. Lula’s hope is that in the next year foreign capital will start to return to Brazil in a big way, the high interest rate monetary regime can be dispensed with, and the economy will grow to create the promised 10 million new jobs.        

Economic growth for the year 2003 was a terrible 0.2 percent, the worst growth performance for 12 years. Inflation of 9.3% is still well above the target rate set by the Central Bank of 5.5%, so the high interest rate regime will be around for some time to come. At the end of 2003, the interest rate sat at a recession inducing 26.5%. The forty percent of the population that live in poverty were being added to by more and more unemployed. In his election campaign Lula promised to create 10 million new jobs but official unemployment in São Paulo hit a record 19 percent in December 2003 and this figure is calculated only on the 40% of workers who registered in the formal economy.  Nationwide, unemployment is rising and incomes are still dropping. In 2003, the average Brazilian watched their pay drop by 15.2 percent to 831 reals, or roughly US$296, a month—enough to pay bills and put food on the table but not much else. A study released on Nov. 25 by the Commercial Association of São Paulo showed that 56 percent of the city’s population had decided not to buy any Christmas presents this year. More than 3,042 city businesses folded in the second six months of 2003, one of the worst business collapses on record. All this in the economic hub of Brazil and the largest industrial and financial region in Latin America. In addition the government lifted price controls on over 200 basic foods stuffs and some essential pharmaceutical items making the daily living conditions all the harsher for the vast majority.

Opposition to the pension reform sparked a demonstration by the Brazilian teachers’ union—40,000 participated— and in June a national strike of public employees took place against Lula’s reforms, with fifty percent of all public employees participating.  It is ironic that the leaders of the striking unions belonged to the majority Lula-supporting wing of the union movement. The CUT leadership did not support the strike, but instead pleaded in vain to their old union President for an amendment of the pension reform bill. The same approach was applied by some of the PT's left wing parliamentary representatives.

In August 2003 Michael Lowy still thought that it was ‘still too soon to judge what politics the new government will adopt.  Will it be able to resist this pressure, to move forward toward putting into effect its program to redistribute income, carry out a real agrarian reform, reorient production toward the internal market, support a solidarity economy, adopt fiscal reform, prioritise investment in education and health, struggle against corruption and tax evasion?’( Logos journal website)  But Lula has already made it abundantly clear to his loyal supporters on the soft left that he would not be changing his neo-liberal medicine. He demonstrated this by expelling four left political deputies from the PT for voting against his pension reforms and by reinforcing the right wing political side of his government. Meanwhile, in the upper spheres, Lula's cabinet dropped four of the party's long-time senior members; the author of the flagship zero hunger program being one of them. The PT formed a Congressional alliance with the PMDB (Party of the Brazilian Democratic Movement), the biggest party in the Congress, to get the pension reform passed and this party is now set for pay back. Two more ministerial positions have been awarded to the PMDB (January 2004).

The PMDB is a loose coalition of centre right notables with an avaricious appetite for the spoils of office that concentrates on distributing regional patronage. In an interview Cordoso explained that he left the party to establish another one in 1981 because it had become what ARENA, the party of favours under the dictatorship, had always been. One third of all ARENA congressmen had joined the PMDB by 1987 in another episode of Brazil's politicians ‘chang(ing) their party affiliations like star players change the shirts of their soccer teams.’ The PT’s main strategist, former guerrilla fighter Jose Dirceu has made it clear that he is seeking a long term alliance with the PMDB,  a party that has never shown any sympathy for the social justice and trade union ideals behind Lula's entry into politics. 

Issues for Debate

During this past year numerous news reports, statements, commentaries and assessments have been produced describing the policy comportment of the new Lula government. Much of this material has expressed some surprise at the way the new government has behaved, dropping policies from those that might be expected to bring about a more equitable distribution of income and opportunity for the majority of Brazilians, and taking up ones that only work on behalf of both domestic and foreign capital. The clear consensus among admirers and critics is that Lula has adjusted, however reluctantly, to the macroeconomic strategy trail blazed by the centre right government headed by F.H.Cardoso. The newspapers have mockingly referred to the first year of Lula as the ninth year of Cardoso. This is some irony as the election of Lula took place in the midst of a popular backlash against the tragic neo-liberal prescriptions espoused by Cardoso, even the bishops complained: ‘Brazilians today are living a feeling of disillusionment with their country. Environmental degradation, globalisation of the economy and social exclusion proves that the model of development needs to be reformed.’( Bishop of Rio de Janeiro April 2000)  

In the 1960s F.H.Cordoso was an influential social scientist closely associated with the dependency school of socio-economic criticism that advocated a break from a process of capitalist modernisation based on a primary export model of economic growth i.e. the conception that the comparative advantage of the third world was maximised by supplying the metropolitan countries with primary commodities in exchange for low priced manufactured goods. In the seventies Cardoso came to believe that there were two polar schools of thought concerning the process of capitalist development: ‘those who believe that dependent capitalism is based on the overexploitation of labour and is incapable of broadening the domestic market, continually generates unemployment and marginality and presents tendencies toward stagnation and is a constant reproduction of underdevelopment (such as Frank, Marini and up to a certain point dos Santos) and those who think that at least in some countries of the periphery the penetration of industrialisation – financial capital accelerates the production of relative surplus value, intensifies productive forces, generates unemployment during economic recessions and absorbs labour expansions  producing in this respect effects similar to that of capitalism in advanced economies, where unemployment and absorption ,wealth and misery coexist.’         

Cardoso came to believe that there was no specific economic law of dependent capitalist development, that the economic problems of countries like Brazil were best explained by fluctuating domestic and international political conditions. That populist politicians obsessed with defending national economic sovereignty where the real culprits in holding back the modernisation of Brazil.  As President, Cardoso set out to modernise Brazil by attracting foreign investment, removing trade barriers, and destroying the economic infrastructure of the corrupt populist political machines by privatising most of the State controlled economic sector. Two years into his Presidency he was telling a newspaper that ‘we have something that neither Marx nor Weber nor anyone else imagined- they couldn’t have done: capital has internationalised rapidly and is available in abundance. Some countries can take advantage of this excess of capital and Brazil is one of them.’ Like a single big storm capital did blow into Brazil, but only to take away the most profitable of the State owned industries. In the five years between 1996 and 2002, $30 billion in FDI went into the purchase of the best State owned companies: electricity, gas, financial and telecommunications. The privatisation of Brazil’s telephone network Telebras, raised $18 billion dollars, becoming the largest privatisation in the world.                  

If Lula continues to dogmatically stick to the same economic strategy as Cardoso’s, his government will be subject to the same financial shocks. Far from providing surer economic security and stability, adhering to the Washington Consensus made Brazil more vulnerable to financial crisis. In early 1999 the financial crisis that began in Thailand hit Brazil and forced the government to take out a loan of $41.5 billion to preserve the value of the currency, yet it was all in vain and the currency was devalued sending Brazil into recession.

Of course many of Lula’s followers hope and believe that he will break with the Washington Consensus as soon as the public debt as been stabilised and Brazil is ready to manage its national economy on terms decided by the elected government, free from the dictates of the IMF. The IMF is the great bogeyman of the anti-global left and with some justification, but it is also a useful distraction for displaced anger, something easily manipulated by unscrupulous advisers of Lula. An indication of how the displaced anger really works was to the fore in the demonstrations against Lula’s pension ‘reform.’ A large part of the working class demonstration considered the government as its own and supported some of its past policies. Some of the placards carried the headline ‘Goodbye Mister da Silva, Lula come back!’  Lula’s advisers of course argued that the pension reform plan was one of the pre-conditions of Brazil receiving its loan from the IMF.

To date the opposition to Lula has confined itself to pleas for a change of course. Some continue to think that Lula’s ‘moderation’ is best explained by the fact that the PT holds only 20% of seats in the Congress and even with its allies in tow is still in a minority position, unable to do anything radical. On May 1, a line up of well know personalities including the clergy associated with liberation theology and the singer Chico Buarque sent a public letter to the media asking the government to make a strong stand against the FTTA. On May 20, 30 out of 90 deputies in the parliamentary faction signed a document criticising the central bank’s monetary policy, and on June 12, several hundred well-known economists published a critique of the economic policy being pursued by the government. However the group of 30 divided on the actual vote, with 24 voting for it out of discipline they said, four of them voted against and were subsequently expelled.         

At the beginning of June the trade union congress of the CUT, with 80 percent of the 2,700 delegates belonging to the PT or the other parties in the coalition government proposed just three amendments to the pensions bill although these were rejected by the government. In the 1990s the public sector service unions gained increasing prominence in the CUT, of the ten largest CUT affiliated unions six are education sector unions, two are social security system employee unions and two bank worker unions.  There is only one remaining blue-collar union, the declining metal workers union. The CUT’s president announced that he personally favoured reducing public sector retirees benefits and opposed the re-indexing of salaries.  No doubt this was music to the ears of the government.

Considering that the pensions bill proposed to slash the benefits of the mainly public sector unions that compose the PT’s core union base it is significant that Lula’s Articulation faction was still able to win 54% of the conference vote, indicating the degree of bureaucratic control the party leadership has over the CUT. The greatest declines in union membership have occurred in the industrial section, which lost 600,000 members in the ten years from 1988 to 1998, and it was these workers who made up the vanguard of the CUT and the PT when they were formed. As union membership has declined, to just 20% of the economically active workforce the bureaucracy has looked to the State for economic subsidy and patronage.

It would be all too easy for socialists to decide at this juncture to withdraw their support and solidarity from Lula’s government yet continue to look to the PT for the political mobilisation of a socialist opposition. In Brazil, the Marxists who remain inside the PT will find it difficult not to become associated or even complicit in the latest political developments. Some on the left, namely the DS tendency, continue to argue for a critical support posture in relation to the PT government. The DS is the biggest left tendency operating within the PT, until recently six deputies and two senators were members of the DS. In the vote on the pension reform they split three ways. Some voted for the bill with a qualification that they were doing so only under the threat of party discipline and one, Senator Heloisa Helena, voted against and has since been expelled from the PT. Another three deputies who voted but who did not belong to the DS were also expelled. By a better than a two to one margin, the PT’s 84 member national directorate expelled Heloisa Helena, Luciana Genro, Joao Bapista and Joao Fontes.

The DS attempted to stop the expulsions by quoting the party rule book and referring to past precedents within the PT, but this defence failed and it now finds itself participating in a government that has expelled one of its best members and shows no sign of veering from its right wing course.  The expulsions signify what will happen to others if they stand up for workers’ interests. It has been suggested that at the very least the DS should withdraw its minister from the government, a government that is in fact a coalition with the class enemy of the workers. This however should only be a first act, the whole question of endorsing Lula as the intrepid leader and only credible Presidential candidate taken by the DS ought to be a matter for review.  ( See International Viewpoint’s no 335 endorsement of Lula) The political history of the PT itself ought to be urgently reviewed with the aim of assessing what sort of political party it has become and how it came to this position. This of course would urgently entail a review of its conduct of affairs in those States like Rio Grande dul Sul.

The PT controlled city of Porto Alegre was the first to implement something called the ‘participatory budget’ over thirteen years ago and other municipal and states led by the PT have followed suit. The PT state government of Rio Grandee do Sul has been referred to as a stunning example of what can be achieved by socialists walking the corridors of the capitalist state ‘an experience of direct democracy without equal in the world.’ (International Viewpoint No 319 on support for participatory budgeting)  Today many in the anti-globalisation movement have taken up the schema as the basis of a new radical vision of democracy. It allows the citizens of Porto Alegre to decide at the neighbourhood level where to invest the city’s development funds, whether in schools or roads etc.  However the percentage is fixed at 10% and in reality it allows the citizens to haggle over the massive shortfall in the funding required to make a real difference. The view as been expressed that the whole process enlists organisation- particularly the trade unions - into making debasing choices that transform these organisations into relays for the policies of the IMF.

The participatory budget is set into a framework of government within Rio Grande do Sul wherein each State pays up to 15 percent of its annual budget to the federal government as its contribution towards servicing the national debt. The State government in turn allocates the share that each municipality pays. The PT administration has never once refused to pay this blood money. When the state of Minas Gerais declared a moratorium on debt payment at the beginning of Cardoso's second term, Rio Grande do Sul refused to support it. The PT State government has also awarded huge tax breaks to large multinationals such as General Motors, Dell, Gerdau, and others. It smashed a strike in the education system and has used force to dislodge MST protestors from the land.

We raise this because from 1998 to 2003 the left wing of the PT was dominant.  Olivio Dutra was Governor and Miguel Rosseto was vice governor, and because  ‘International Viewpoint’ (the English language magazine of the Fourth International) reported: ‘a globally positive judgement on the Dutra administration contrasting sharply with the record of the PT administration elsewhere in Brazil.’(International Viewpoint no 319).  

Workers and activists need to know more about the real impact of participatory budgeting, especially now that the World Bank has recently characterised the PT and DS led government of Porto Alegre as the best pupil of the World Bank and the IMF! It is worrying that the World Bank has translated, published and distributed a propaganda handbook written jointly by the last mayor of Porto Alegre, Tarso Genro and Urbitaran de Sousa under the inviting title ‘The Participatory Budget: the Porto Alegre Experience.’ In this handbook we are told that in Brazil 73 led PT municipalities have implemented the participatory budget. It is worrying that the DS and the Fourth International think so highly of the participatory budget experience, and trumpeted the socialists credentials of the PT mayor of Porto Alegre who ran for State office in October and lost so badly. The result of the election in Rio Grande do Sul being against the trend everywhere else, he got a mere 8,000 votes in a State where he needed a minimum of 25,000.

Finally, we need to reassess the history and practice of the PT, has it been changed into something like Spain’s Socialist Party, the model to be imitated according to no less an authority than Lula himself? Cesar Benjamin, an economist and co-ordinator of the movement Consulta Popular, was recently quoted as saying ‘to speak of a government in dispute was already a mistake nine months ago. Today it is simply complicity with charlatans. The co-option of the PT in the system of power is all the more shameful because it is dissociated from any real gain for the social base that it ought to represent. On the contrary the PT has agreed to become the hangman of its own social base.’  If the PT has become the hangman of its own social base it did not happen because of an election that occurred only a couple of years ago.

Conclusion: lessons of Brazil

Certain lessons suggest themselves from this account of the PT’s evolution. An obvious point, but one still worth making, is that in the present period reformist governments – particularly in the semi-colonial countries – cannot carry out serious reformist programmes without breaking from the logic of capitalist globalisation and facing the severe consequences that would follow from defying the IMF-World Bank-WTO institutional axis. Not only has Lula failed to do this but social programmes instituted even under the avowedly neo-liberal Cardoso administration are being rolled back. Even in the WTO negotiations at Cancun, Lula has taken a stance that, far from having any socialist content, was indistinguishable from that of his ally, Vajpayee of the Indian BJP. The failures of the Lula government are not a question of bad faith, or of the character of Lula the individual, but an indication that the reformist road is closed. It also needs to be said that the rightward evolution of the PT is hardly a new phenomenon. Many on the PT left disagreed with the choice of Jose Alencar of the right-wing Liberal Party as Lula’s running mate. But this should not have been a surprise – the PT had been involved in electoral pacts with the Liberals for years. Likewise Lula’s class collaborationist election campaign only put the seal on a long process of becoming “respectable” in the eyes of global capital, a fit candidate to police the workers and peasants of Brazil.

Finally, we must deal with the class character of the PT today, not as it was when it emerged 25 years ago. In the Marxist tradition, parties that vacillate between the reformist and revolutionary roads have been regularly described as centrist. Normally centrism is a transitional phase, as a reformist party moves to the left or a revolutionary party moves to the right. The PT was unusual in that it arose organically from the class struggle in Brazil and for many years was an undefined party which could not be definitely described as either reformist or revolutionary. But this undifferentiated phase could not last indefinitely, and for some years now the character of the PT, as a reformist party –a bourgeois workers party in Marxist terms – has become all the more definite and clear.

The trouble has been that many on the international left saw the PT as a new model that could transcend the old paradigms of reform and revolution. Hence we had the idea of the “class struggle” party or the “anti-capitalist” party. In relation to Brazil this has led to a tendency to prettify the record of the PT, exaggerating the impact of the “participatory budget” and downplaying the PT’s conversion to neo-liberalism. Elsewhere there have been numerous attempts to build parties or alliances on the PT model, leaving behind the “outmoded” distinction between reform and revolution, in favour of a vaguely “anti-system” approach. The Respect coalition in Britain, to name but one, is only the latest in a long line of these well-intended initiatives. But the Brazilian PT was the best chance this strategy had, and its degeneration shows the bankruptcy of the strategy.

It has become clear that concepts, which were once taken for granted in the Marxist movement –basic ideas like class independence and not participating in bourgeois governments –, have been forgotten by a large number of militants. Our aims ought to include pointing to the wisdom contained within these classical conceptions so that revolutionary Marxism can once again inform and educate the socialist movement and provide a firm grounding for the new generation of militants.