In Defense of Dependence Theory: a case study of Brazilian capital under Bolsonaro’s rule. (Part II)
In the follow-up piece on my previous article, I bring a compilation of Paulo Guedes’ arguments to defend the resurgence of the critical political economic theory in the current context of the system.
Why Dependency again?
I chose to bring a compilation of Paulo Guedes’s arguments to defend the resurgence of the critical economy’s circle of thought in the current context of a systemic crisis of political and economic strands of liberalism. First, I need to clarify why I am not focusing on the role of the broader political movement that brought Jair Bolsonaro to power (that said, the social media fake news, peripheral conservatism, neo-Pentecostal churches, etc). Bolsonaro is now internationally known for its controversial statements and is considered by many as a proto-fascist. Not only did he and his sons (that are also politicians) have corruption and homicide allegations against them, more than a one-time Bolsonaro traveled South America praising the memories of dictators like Pinochet in Chile and Stroessner in Paraguay. Thus, not only Bolsonaro is proud of his ignorance about economics, I believe his decisions are in a frontal collision with Guedes’ beliefs. More than once, the elected president acted without the consultation of the minister and when he occupied the position of a Federal Representative at the National Congress, he voted against privatizations and the pension reform time and time again.
As Karl Marx once said, “all great world-historic facts and personages appear, so to speak, twice. (...) the first time as tragedy, the second time as farce” (Marx, 1852). First Brazil had to face the bloody state of exception that halted the social-democratic reforms backed by popular support in the 1960s and now is revisiting the same ideology, this time in a caricaturistic version of itself. Both historical moments unite Brazil through the imperfect democratization process of the country during the 1985-1988 period. The failure of the Constitution of 1988 lies in its incapacity to deal with historical structures of segregation (that disfranchised Afro-Brazilians) and the authoritarian roots of the conservative local elites. The Constitutional Assembly, reminds us of Ruy Mauro Marini, was already dubious concerning their legitimacy and representativeness. Portions of the Congress of 1988 were not elected and several senators that helped to draft the new Magna Carta were members of the parties of the former Military Regime. Marini’s acknowledgments regarding the process of democratization is that “the Brazilian constitutional tradition, gestated within the bourgeois political theory, has as determinant influences, first being the authoritarian tendency and the liberal.” (Marini, 2016).
Being an important name in the school of Theory of Dependency, Marini had the privileged point-of-view of being outside Brazil until the 1990s. His twenty years teaching at the Universidade Nacional Autonoma de Mexico helped him to include in his broader theoretical framework the embeddedness of Brazil within Latin America’s development but also allowed Marini to see the conjecture of the political and economic reforms of the 1980-1990s democratic interregnum. The question of today is the problem of yesterday, one can say. In another article from 1992, El experimento neoliberal en Brasil (The neoliberal experiment in Brazil), Marini tried to answer the post-1988 constitution rising economic challenges. The socio-economic inequality that Brazil has been historically facing since time immemorial, posted what Marini defined in the following:
“Today, like yesterday, the posted question is how to keep the stabilization of an industrial economy that, being at its heights positioned in the eighth biggest in the capitalist world, occupies in the United Nations classifications one of the last ranks regarding generated wealth distribution.” (Marini, 1992).
The inequalities that Marini was speaking about would be partially dealt with in the Constitutional framework of 1988 that eventually was named “The Citizen’s Constitution”. However, even though Luiz Inácio Lula da Silva term brought millions out of extreme poverty, the pact for social harmony favored more the top 20% of the society instead of providing real infrastructure and institutions that could enable the people to engage as free citizens without the dependency of a very fragile alliance between a center-left government and the rentist elites. The Brazilian Crisis was tamed temporarily by the class alliance defended by the major tendency within the Workers’ Party. In a way, Lula’s government brought an internal dependency of the State (that became heavily dependent on commodities in the global market and on loans from the national banking system) on the economic elites. The social inclusion and affirmative action programs, as history showed us, can be easily dismantled by a conservative and proto-authoritarian regime (Temer and Bolsonaro). Now Brazil is again in the UN’s Map of Hunger and has more than 50 million of its citizens back to extreme poverty. The graphic below displays the production of total Industry in Brazil and the levels of unemployment of youth. It was expected to see that after the expansion of the higher learning system and several investments in Research and Development during the period of 2001-2014 by the social-democratic government, the country should have had increased its productivity and employment exponentially.
But actually, the graph (graph. 3) confirms again two different positions of mine. First, that the levels of production (in millions of dollars) were steadily growing despite all the funds and programs of the State. This can be associated with the kidnapping and mismanagement of resources provided by the State to the private sector (through the National Bank of Development loans directed debited from the National Pension Fund). Instead of deploying those resources in the new research infrastructure that was built and in the qualified human capital (in the form of better wages or capacitation), companies used the money to inflate their profits through mergings and financial speculation. My second point is that Dilma’s anti-cyclic measures of austerity sacrificed the newcomers to the labor market. Curtailing essential expenditures in education, health, and infrastructure (like subsidies for public transport) she imposed in the new labor force a downward pressure for survival. In this scenario, not only a lot of qualified and skilled workers were forced to work for whatever penny they could find (considering that due to the total levels of industry outputs we can see that no investment whatsoever was inputted in production assets) she managed to turn the first mass of skilled workers in our history into one of the cheapest kinds of labor available.
Endorsement to such view comes also from Luiz Carlos Bresser-Pereira, another Brazilian scholar that also participated in the Ministry of Finances. For Bresser-Pereira, the national elites of Brazil are dependent “because they often consider themselves ‘Europeans’ and the mass of the people as inferior” (Bresser-Pereira, 2015). He proposes that the dependency problem is much more serious in Latin America than, we can say Asia and Africa. This reality emerges from the peculiar characteristics of the Colonial Empire of Portugal and Spain, but I would say that adding to this, the 20th Century waves of European and Japanese migrants full of racialist and eugenist ideas faced in Brazil a different status than the United States. Whereas in the United States, Italians and Irish were considered another kind of humanity different from the Anglo-Saxon one, in the South American atmosphere those groups were included in the process called “whitening” of the nation. The idea behind this theory is that, bringing more elements of white races to a black-majority one, after some generations the whole country would be whiter and morally stronger.
The established racist structures of the country coupled with an economic elite that is white and sees the country as a way to accumulate wealth and then go back to the original land has never allowed Brazil to develop a national bourgeoisie and is the ethos of the Brazilian Crisis. Jesse Souza defends that the process of development in Brazil is a “selective Modernization” (2000; 254-266). The embracement of Brazilian elites of modern social innovations comes from the necessity of, like in Il Gattopardo’s classic passage, “everything must change so that everything can remain the same”. Concessions to the subaltern classes have always been the case for Brazil’s history: the military regime brought labor rights to farm workers’ and before that, the caudillo Getúlio Vargas presidential term - in an attempt to industrialize the country - created the Consolidation of Labor Laws.
But the 1990s, as appointed not only by Marini and Souza, represented the failure of the “democratic-popular pact” (Bresser-Pereira, 2015). Bresser-Pereira calls this new stage of Brazilian Capitalist development as being the “liberal-dependent pact”. The implementation of the Washington Consensus prescriptions and the de-regulation of those previous concessions is the last chapter of the local elites’ incorporation by the stronger capital of the Global North, and more specifically the United States financial elites. The Liberal-Dependent pact is the ideological neoliberal hegemony per se.
For Bresser-Pereira (2015), Sergio Costa (2002), and Marini (1992), the economic crisis of the 1970 and the 1980s was associated with the “dilution of nationalism cause by the military regime” (Bresser-Pereira, 2015) crippled the national project defended by Brazil’s civil society. This new phase, represented symbolically and materially by the figure of Minister Paulo Guedes, is to be the definitive borderline of the end of the democratic-pact that brought some elements of Dependency to the policy-making ambient. The rent-seeking capitalists now, like leeches, are more interested in sucking resources from the public sector through their investment returns from the central government debt (refer to graph. 2); meanwhile, the financial sector raises expectations and takes advantage of the macroeconomic and political instability to bargain the country’s high-interest rates with the State.
The case of Brazil despite its size and importance represents a situation where a huge economy of which performance and productivity are not based in the current economic modalities appointed by Bresser-Pereira, being those of knowledge and professionals’ capitalism. As I stated before, the whole formatting of Dilma’s "counter-kondra" measures enabled capital to erode the fragile arrangements belonging to a recent knowledge-based labor market. The high dependency on commodities like soybeans and sugar serves to reinforce the financial sector, strengthens the old oligarchies, and links the national dependency of the international market to the worst version of capital: the hedge funds. The graph below (graph. 4) sheds some light on the issue. The numbers are revealing of this new cycle of dependency of Brazil:
The normalization of unemployment rates, here superseded by IBGEs and ILOs measures, speaks a lot about the economic fragility faced by Brazilian workers under the current chapter of the Brazilian Crisis. The period between 2000-2004 represents the first term of Lula’s mandate. It is considered a period of balancing the public debt and controlling inflation in an attempt to create more jobs by providing a scenery of stability for international investors. 2004-2008 is when the government started to implement the now-famous programs like “Bolsa Familia”, the college’s affirmative action propositions, and in the macroeconomic spectrum the period marked by the commodities boom in the global market. The drop in 2008 is due to the international subprime crisis. However, incredibly, in 2010 the GDP growth peaked above 7% and is often reminded in electoral campaigns of the Workers’ Party. This movement is twofold: first, it comes after an inflationary bubble in the commodities sector, mainly in the soybeans and animal protein markets that brought to Brazil a lot of dollars to be recycled in the domestic market; secondly, it is when the national industrial production of cars and electronics received a package of measures like tax reductions for consumers and the government allowed MNCs to borrow money to invest in the productive infrastructure. The interesting element though is represented by the post-impeachment period: 2016 is marked by a huge increase in the GDP (stagnated in 2015) accompanied by the increase in unemployment.
Growth is rising unemployment. Those are the golden words of late capitalism. For the first time in history growth and productivity are decoupled from full-employment and real wage increases. As Brynjolfsson & McAfee masterly explained in their book, The Second Machine Age (2014), the incremental developments in technology and the global expansion of financial capitalism imposes an important question: how can we save welfare and jobs? His views are in-between optimism and pessimism. For the researchers, the development of programs and proper responses to the new age of productivity and finances demands the comeback of the state impose redistribution. They are saying: tax the rich, distribute wealth and provide to your country’s citizens free and accessible healthcare and education. This is important because in their view we are already shifting from a labor-intensive economy (globally) to a future economy based on services, non-monetary transactions between peers, and knowledge production.
My point is, such intertwining of the global economy is paradoxical, to say the least. As markets and borders merge, the necessity of a strong institutional framework and a more democratic state is paramount in other to avoid social disruption and massive unemployment rates. This is the opposite mentality of Paulo Guedes and Bolsonaro's general answers for the Brazilian Crisis. Bringing back the framework of dependency is imperative because it tackles the movement of subservience that Guedes advertises as being the solution to Brazil’s worst crisis since the Empire. How can Brazil transition towards a broader and freer market with its industrial infrastructure crippled and the human capital barely prepared for a new age of technology that demands high skilled workers? Curiously the praised agribusiness sector in Brazil has already engaged in what they call Precision Agriculture and is now highly technology-intensive. You can verify in any construction site in Brazil where their workers came from. The consequences of this transition nationwide, without any basic welfare to allow those families to reinsert themselves can only be called genocide.
The importance of the Theory of Dependency comes to be, in my opinion, because its core is embedded in Marxist concepts. It is endorsed by a critical view of the world that is capable of trespass the limitations of neoliberal or orthodox economics. Dependency allows the social scientist to observe and interpret reality in such a holistic way that general progress is its goal. Marini already alerted us about the geopolitical qualifications of Latin America. Dependency goes beyond the limited liberal theory and enables the analysts of the Brazilian Crisis to adequately input in their analysis the international capitalist exploitation and the role of the national elites in promoting economic pillages. The new proposed pension reform is nothing more than new pillage against the nation’s workers.
Guedes misses the basic relation that (if we believe that he is arguing in good faith) there is no even transaction between peers when it comes to the Global North and the Global South. Even the national elites will end up losing in this new pact. The only privileged group will be the rentistas. In the measure that the markets grow and capital seeks for new spheres of human activity to reify and turn into commodities, the usage of violence (in all of its forms) is the prime action. Marini sees this movement as the same within a shop floor. Despite the new managerial shifts turning workers into collaborators, at the end of the day, the bigger capital will always impose itself against the weak ones. Nationwide, the industrial and agribusiness capitalists will be ground by financial capitalism and those incapable of mutating into a Wall Street shark will not survive. Capitalism not only imposes submission amongst those that own nothing to those that own everything, but also imposes submission of those that own less by those that own more. Capital devours capital.
In this paper, I briefly drafted the importance to rescue the Theory of Dependency in a moment of crisis. The German thinker, Reinhart Koselleck in his important work on the term said that “[a]pplied to history, "crisis," (...) has become an expression of a new sense of time which both indicated and intensified the end of an epoch” (Koselleck, 2006). The Brazilian crisis, in its particularities and specificities, is a mere local disruption of global capitalism. The new tendencies within neoliberal economists and far-right militants alike bring about the reason why center-right liberals and the youth are now turning left. The age of negotiated neoliberal reforms is over and now we need to act against a more authoritarian version of neoliberal capitalism that is not willing to keep the democratic institutions working. This paper tried to investigate a very recent event in Brazilian history under the light of the dependency framework. The data gathered only ratifies the holes in the neoliberal arguments that are now penetrating the popular jargon. The last stage of development in capitalism imposes reflections on what economics means. I believe that brings back the greek conception of the word: οίκος – "household" and νέμoμαι – "manage". To manage the household, it is necessary to compute all the objects, people, and environmental constrictions of the home. The neoliberal theory forwarded by Guedes’ "Chicago Boy” ethos is incapable of that.
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