The Cardoso Legacy

Perry Anderson reflects on the political future of Brazil

For two decades – more or less since the Falklands War, and the end of the military dictatorships that had become an international byword for counter-revolutionary ferocity – South America has been largely forgotten by world politics. Recycled democratisation, debt and dependency offered few conflicts and yielded no consequences to compare with dramas in Eastern Europe or Russia, the Middle or Far East, even domestic convulsions in North America. The days of the Cuban Missile Crisis might have belonged to another eon. Today, there are once again tremors in these backlands of the larger arena. At one end of the continent, Argentina has seen a social breakdown, amid the largest sovereign default in history, that is the equivalent for neo-liberalism of the collapse of Communism in the Soviet Union. At the other, Venezuela teeters day by day on the brink of civil war. Till very recently, these were the two richest societies of the region. In between, American gunships swarm over Colombia as guerrillas shell the Presidential Palace; desperate Indian populations loft a radical colonel to power in Ecuador, where the dollar – thousands of miles from Washington – is now the official currency, and in Bolivia have come close to electing one of their own as President, a militant farmer of coca, the other currency of the area. Under weak rulers, Peru and Paraguay are seething with discontent. Everywhere, economic crisis is biting hard.

In this landscape, the sweeping electoral victory in Brazil of a burly former metal-worker from a family of 22, ungrammatical in speech and untutored in government, is the loudest rumble of thunder to date. With a population now approaching 180 million, more than the rest of the continent combined, Brazil towers over its neighbours, but has never historically led them. Whether this might change under Lula is one of the many uncertainties posed by his capture of the Presidency at the head of the Partido dos Trabalhadores. Within the country itself, the nature of his triumph raises other questions. In the great Brazilian cities, his victory was celebrated with explosions of joy in the streets. For the disinherited throughout the country, one of their own was, incredibly, in power at last. In the United States, on the other hand, after initial misgivings on the Right, establishment organs are already falling over each other to reassure their readers that Lula is now a reformed character, who can be trusted to cherish ties with Washington and understand the concerns of Wall Street. Here in the UK, the Economist more warily – but more bluntly – asks: ‘Can Lula finish the job?’

The ‘job’ in question is what has been executed in Brazil in the past eight years, under Fernando Henrique Cardoso. Here, before any consideration of the rebus of Lula himself, is where all analysis of the current situation in Brazil must start. What kind of verdict does the impending change represent, in the first instance, on Cardoso’s Presidency? Lula campaigned strongly against his record, and even José Serra, the candidate of his own party, avoided compromising mention of him. Yet opinion polls suggest that Cardoso’s standing as an individual has held up well, and there is no doubt that many Brazilians – principally, but not exclusively, from the middle classes – believe that he has been their most enlightened ruler to date.

Cardoso’s defenders can point to a series of achievements, which – even if often exaggerated in official apologias – have been real enough. Hyperinflation was broken at the beginning of his rule, unambiguously benefiting the worst-off layers of the population. Illiteracy was reduced; infant mortality fell; there was some redistribution of land. If none of these advances was very spectacular – Brazil lags far behind even Mexico on the first and third, not to speak of Argentina or Chile on the second – the social ledger is not entirely bare. Nor, for that matter, is the administrative. The state apparatus has in certain respects undergone genuine modernisation, rendering it less opaque and more efficient. Levels of corruption, though still high, have fallen. Statistical information is somewhat more reliable, budgetary controls are tighter, regional pork-barrels are fewer. All this has eroded the archaic oligarchies of the North-East: forces that helped Cardoso to power, but have weakened under him – perhaps the most important long-term change of these years.

If it is a mistake to dismiss these gains, they remain modest compared with the damage inflicted by the Government’s macroeconomic policies. The defining character of the Cardoso Presidency has been neo-liberalism ‘lite’, as Brazilians – pioneers of nicotine images of politics – would say. In other words, the kind of neo-liberalism that predominated throughout the developed capitalist world in the 1990s. These were years when doctrines of the Third Way or the New Centre – Clinton, Blair, Schroeder – ostensibly distanced themselves from the harder versions of neo-liberalism pioneered by Reagan and Thatcher in the 1980s, while in practice continuing, indeed often accentuating, the original programme, if now tricked out with secondary social concessions and a more emollient rhetoric. Throughout this period the fundamental dynamic of neo-liberalism has persisted, unabated: its two core principles – deregulation of markets and privatisation of services (or industries, where still public) – setting the parameters of economic correctness. In the United States, it was the brackish aftertaste of Clinton’s regime in the White House that made sufficient voters too queasy to return Gore. But the real legacy of Clinton’s rule was the abolition of New Deal restraint on speculative banking, the deregulation of telecoms, and the bubble economy that burst in the wake of his exit: Enron, Tyco and WorldCom its parting signatures.

In underdeveloped conditions, the sequence was necessarily different. Convinced that Brazil could not finance growth from domestic savings, and that its public enterprises fostered inefficiency and corruption, Cardoso overvalued the currency, put the state sector on the auction block and threw the economy wide open – gambling on imports to hold down inflation, and foreign investment to modernise infrastructure and industry. Brazil is a huge country, with a large internal market and abundant resources. Overseas capital duly flowed in – $150 billion by the end of Cardoso’s mandate – but did little or nothing to dynamise the Brazilian economy, whose rates of investment remained feeble throughout his rule. Attracted mainly by cheap assets and sky-high interest rates, foreign operators snapped up public enterprises, acquired local firms and – above all – bought state bonds. Trade deficits soared, interest rates were raised even further to prop up the currency, and debt levels became hopelessly vulnerable to loss of confidence, triggering enormous outflows whenever there was turbulence in international financial markets – Mexico in 1995, East Asia in 1997, Russia in 1998, Argentina in 2001 – and an inevitable collapse of the exchange rate. Repeated IMF bail-outs merely deepened the pit of debt into which the country was being driven. When Cardoso came to power, the trade balance was in surplus, and public debt some 28 per cent of GDP: by the end of this year, it had doubled to 56 per cent, most of it held on short-term maturities. Under his Presidency, per capita growth rate has been a miserable 1 per cent a year. The results of the Brazilian variant of neo-liberalism are plain for all to see: worsening stagnation, falling real wages, unprecedented unemployment and a staggering debt burden.

The regime stands condemned on its own terms. The Government’s original achievement – monetary stabilisation – is in ruins: the currency is worth a quarter of its value at the outset of Cardoso’s Presidency, interest rates are the highest in the world (22 per cent), and the country is staring a moratorium in the face. Violent crime haunts the big cities as never before. Inequality remains very nearly the worst in the world. Dependency – in every deleterious sense – is incomparably greater than it was when Cardoso, in a now distant past as a sociologist, once proposed a critical theory of it.

The logic of a neo-liberal model on the periphery of world capitalism puts any country that adopts it at the mercy of unpredictable movements in the financial markets at the centre, so Cardoso’s misadventures were in large measure the chronicle of a fiasco foretold. But this was also a timorous and incompetent regime. The exchange rate was overvalued from the start, and no thought was given even to the modest degree of capital controls that a dependent neo-liberalism still allows, and which protected the Chilean economy from the worst ravages that Brazil was to suffer. More generally, the notion that the key to attracting foreign capital was deregulation and privatisation à l’outrance was extraordinarily naive. In the same years that Cardoso was leading Brazil into its present blind alley, China was attracting productive foreign investment on a scale that dwarfed the hot money in Brazil, while maintaining tight capital controls and a non-convertible currency, to achieve the highest rates of GNP growth in the world. There is no shortage of acute economic problems, not to speak of inequalities and injustices, in China today, but the contrast between vigorous development and crippled dependency could not be starker.

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