The New Brazil

Raúl Zibechi. The New Brazil: Regional Integration and the New Democracy. Oakland: AK Press, 2014.

The New Brazil: Regional Integration and the New Democracy essentially talks about the construction of a new elite in the country. In general terms, it’s very successful in presenting the new intersectoral alliance that has taken control of the state, the industries and the centers of social influence in Brazil. The social represententation of these sectors has provided the ideological justification for the affirmation of a new state capitalism in Brazil. I feel I need to make a preamble before talking about the book itself.

The violent and exploitative colonial past of Latin America is widely known. The end of the Portuguese and Spanish empires did not mean that the new American countries made significant institutional strides. Indeed, the Portuguese and Spanish elites established stratified economic systems that depended heavily on slave or semi-servile labor. In Spanish America, the mitas and encomiendas system was ostensibly based on the exploitation of indigenous labor. In Portuguese America, Brazil, the various colonial economic cycles were based on several forms of slave labor (mostly African) and on the immediate imposition of the latifúndio by land donations from the Portuguese crown. The result was the building of an economic elite with close ties to the Portuguese empire. Moreover, given the specificities of the Brazilian independence, which kept a Portuguese king in the throne, there is a continuity between the colonial and the post-colonial elite in Brazil. These facts have shaped the constitution of the Brazilian national state.

None of that is unknown. Raymundo Faoro, in Os donos do poder (“The Owners of Power,” in English), notes that Brazil’s institutional framework was created essentially by Portuguese colonialism: the existing bureaucracy was intended to enforce the Portuguese crown’s will and the country was but a “private property” of the king. From early on in Portugal the crown radiated its will among the castes of the elite, which expanded until they were adequately capable of serving the ruler. As with all “civilized societies,” political and economic power were unified.

Eduardo Galeano’s Open Veins of Latin America, for decades an essential book for a large part of the left, recounts this history of domination and economic exploitation in Brazil and in Spanish America. Spain and Portugal’s expansions also naturally created local elites that came to hold power after independence. According to Galeano, there was continuity between yesterday’s exploitation and today’s — they’re indistinguishable. If the political and economic elite in Latin America has different names, it still benefits from the system that was build over centuries.

Alvaro Vargas Llosa, Plínio Apuleyo Mendoza, and Carlos Alberto Montaner apparently disagreed. In their Guide to the Perfect Latin American Idiot, the three authors describe Galeano’s book as the “idiot’s bible.” To them, the main thesis of the book could be summed up in one sentence: “We’re poor, it’s their fault.” Llosa, Montaner, and Mendoza must think, then, that the system introduced and shaped since the colonial era had little effect over the economic development of the region. Or perhaps they think that there are no economic and political elites that benefit from the current system in Latin American countries? If Latin America is poor, whose fault is it? Latin America itself? Whose fault is it inside Latin America? The three of them seem to think that the existing systems are but neutral automatons, and not institutions that were organized for the benefit of specific people and classes of people.

Llosa, Mendoza, and Montaner also seem to think that paying attention to the development of the institutions in a country moves a transcendent guilt to their underdevelopment. In this scenario, the country would be subjected to external powers and would not be able to decide on its own destiny. The lack of methodology causes problems here: it’s obvious that black and indigenous populations were exploited in the political and economical evolution of Latin America. It is also obvious that the exploitation of the labor of these populations served the interests of an elite. If they were exploited, it’s correct to say that “it’s their fault” (someone else’s). And who was that elite? Initially, it was composed of the colonial powers, but was soon moved to local elites.

Brazilian (classical) “liberal” economist Roberto Campos wrote in the introduction to the Brazilian edition of the Guide:

Large part of our underdevelopment can be explained in cultural terms; unlike Anglo-Saxons, who value rationality and competition, our cultural ingredients are the Iberian culture of privilege, the indigenous culture of indolence, and the black culture of magic.

Ignoring for our purposes the Campos’s explicit racism (Native Brazilians certainly weren’t too fond of working for someone who was trying to enslave them) and idealization of rich countries, he seems to imagine that the “cultural terms” that explain our underdevelopment exist in a void. As if the “Iberian culture of privilege” didn’t exactly privilege an economic elite; as if “privilege” were a diffuse phenomenon that makes countries generally underdeveloped but doesn’t serve anyone’s interests.

Thus, any theory on the development of any country (in particular Latin American ones) that excludes a class theory is nonsense. Any theory that intends to explain the inner workings of economic systems in Latin America must start from the exploitation of the labor of lower classes by an upper class, since economic institutions in Latin America were created precisely to extract the value of labor from the many to the benefit of the few.

Daron Acemoglu and James A. Robinson in Why Nations Fail reach that exact conclusion. To them, the “institutions” (that is, the state) in a country can be a bigger or smaller hurdle to economic development. Countries whose institutions are less “extractive” (as opposed to “inclusive,” in their terminology) tend to be underdeveloped. Acemoglu and Robison talk extensively about Latin America and the continuity between colonial’s systems and today’s systems of exploitation.

At the same time, the changes in Latin America were accompanied by realignments in the international field. The local elites existed first as a proxy of the colonial powers and then realigned themselves as proxies for neocolonial powers. The United States replaced European bureaucracies. The dependence system that were established in the late 19th and early 20th centuries didn’t depend on a political union anymore; local political power was subject to political and economic power abroad. This didn’t mean that local elites were powerless by themselves, but that their power would be limited by a larger one.

This relationship between local and foreign (generally linked to transnational corporations) elites isn’t peaceful. There are conflicting interests at play, but they’re solved by recourse to the American military hegemony. Local elites have to content themselves with a smaller slice of the plunder — and equally, it would be an inconvenience for foreign elites to establish a new local political system for foreign exploitation. Just like the British established contingent alliances with local elites in India, foreign corporations establish contingent alliances with local elites that are too fragile. In Spanish America especially, the elite has been generally vulnerable to foreign powers.

However, history isn’t deterministic and it’s possible that a country should be able to escape its condition, at least partially. And that’s the subject explored by Raúl Zibechi in The New Brazil. Zibechi outlines in the book the reorientation and partial independence of the political and economic elite of Brazil from the United States — which, for him, undergoes a weakening of its hegemonic power. To explain this realignment, Zibechi calls forth the theory of sub-imperialism developed by Ruy Mauro Marini in the 1970s, which stipulated the existence of middle-sized power centers in addition to the hegemonic power.

Marini was a Marxist, but deviating from orthodox Marxism that emphasized that Latin American societies were by mid-twentieth century in a pre-capitalistic stage. Rather, he stated that there was then a “sui generis capitalism.” Marini contended that the existence of a hegemonic power is indisputable (the USA), but local elites are strong enough to establish a relationship of “antagonic cooperation” (in August Talheimer’s term) with the foreign elite. Besides, sub-imperialism should also require that there would be certain imperialistic ideological tendencies within a given country. The military dictatorships that swept South America from the 1960s on represented this project. Zibechi underscores the existence of this project in Brazil during the military regime: the generals who held power openly planned to build a sphere of influence that could put the exploitation regimes from our neighbors in the service of a local elite. (I should note that Zibechi is ambivalent towards the term “sub-imperialism,” since “imperialism” itself may be applicable. However, given the cooperative features of the Brazilian system with the hegemonic power, Zibechi insists that the term is relevant to explain the construction of a regional sphere by Brazil.)

Zibechi highlights two things in the consolidation of Brazil as a regional center of power: the reorganization of national capitalism and the building of South-South alliances that replaces the United States. This latter point is the weaker part of Zibechi’s work: the existence of plans and international alliances has never indicated the presence of effective political influence. The strategies and declared objectives of Brazil’s Office of Strategic Affairs has little relevance when we see how little they’ve been implemented. A good part of the predictions about Brazil’s situation seems to be based on megalomaniac expectations about the growth of the country and its international influence. It’s interesting to note that the consolidation of an extractive elite doesn’t need high rates of economic growth. Capital must be redistributed, but it mustn’t necessarily grow at a high rate. The country can present itself as a regional power center if its economy is relatively large in contrast to nearby countries, even if growth rates aren’t spectacular.

Moreover, the emphasis on national strategic planning also tends to underestimate the role of structural incentives for expansionism. If the military regime’s ideology enabled Brazil to fulfill it’s supposed potential as a power center, there were incentives already at play before then. Pedro Campos in his Estranhas Catedrais — as empreiteiras brasileiras e a ditadura civil-militar (literally, “Odd Cathedrals: Construction Companies and the Civil-Military Dictatorship”) points out that construction companies in Brazil had already carved up a niche for themselves in the government at least since the Juscelino Kubitschek administration in the mid-1950s. The infrastructure work and the military were interested in close ties to the government, solidifying their cartel — still in existence.

Evidently, there’s logic in the ideological resistance to the international submission to the USA from the military’s point of view. Given the structural incentives to internal and external centralization, only a conscious effort of separation could prevent annexation by inertia. This is what the military from the Superior War School thought. Golbery do Couto e Silva, mentioned by Zibechi and one of the most important ideologues of the regime, explains it clearly:

Small nations see themselves reduced overnight to the condition of a pygmy state and can already envisage their own melancholic end, inevitable under the regional integration plans; the power equation in the world is reduced to a small number of factors, and only a few feudal constellations — baron states — are visible, surrounded by satellite states and vassals. (p. 26)

In any case, the consolidation of the imperialistic character of Brazil happened via the broadening of the elite. The approximation of the construction companies to the Brazilian state gradually created an influence center inside the Brazilian state, but Zibechi highlights another one: the unionists.

From the late 1980s on, the largest unions in Brazil, urban industrial workers mostly, started to gain space in the decision making inside firms and put labor in close proximity to the managerial class. Brazilian unions have always been under state supervision with the union monopoly and the union tax, and the constitution of 1988 didn’t make any changes to the system. During the 1990s, with the start of the privatizations in Brazil and the opening of the pension funds management to labor, there was a definitive approximation between workers and capitalists. In union centrals such as the Unified Central of Workers (CUT) a bureaucratic class gradually took form to represent workers, having financial control over the economy (through pension funds) and collaboration of management classes (seen as allies against the “recessionists” linked to financial capital, who favor restrictive measures such as raising interest rates).

The election of the Workers’ Party (PT), which had strong ties to unions, was the final stage of the annexation of a union elite to the Brazilian state. Tens of thousands of union leaders took over state bureaucratic positions. Their access to pension funds allowed PT to use them to control both capital and labor, bringing them under the tutelage of the state. Zibechi states:

The PT platform, during the 2002 election campaign, asserted that pension funds are “a powerful tool for strengthening the internal market, and a form of long-term savings for the country’s growth.” Beyond this classic and reasonable argument in favor of pension funds, there was another line of thinking within the PT that saw pension funds as a new strategy to control capitalism and to moralize it. It is a shift in perspective that is embraced by the PT leadership and leads them to strategize, alongside trade unionists linked to pension funds, about the country’s future in terms of the market and the financial system. (p. 56)

However, PT was only able to muster the power of the pension funds because of the “privatizations” that had started under the Fernando Henrique Cardoso’s administration.

Bankrupt, the state companies in the 1990s were not much more than a burden to the state. To reorganize them without losing control, the state “privatized” them using government money. Shareholders groups were built by state pension funds (alleviating union opposition) and the government still financed the buyout of the companies through BNDES. The state investment bank had a fundamental role in the privatizations of the mining company Vale, the communications company Telebrás and state banks (which, subsequently, were merged into larger banking conglomerates). The Brazilian state kept partial or full control of the “privatized” companies — BNDES were one hand of the state while pension funds were the other.

While state companies welcomed mixed administrations, the opposite also occurred: private capital was absorbed into the state. The well known Lula administration policy of “national champions” was responsible for the creations of a constellation of business groups that were nominally private but started to integrate into the state’s orbit. Pedro Campos states that, always through BNDES and pension funds, the Brazilian state is present in 119 corporate groups, compared to 30 in 1996. (In my article on Brazilian privatizations, I explore this relationship of the government and large businesses in Brazil.)

Zibechi also notes that the reorganization of Brazilian capitalism had Petrobras as one of its main anchors, which showed the “the advantage for the state in employing strategic plans with long-term objectives” (p.135). It’s rather ironic to read about long-term objectives in relation to Petrobras when we watch the several corruption scandals involving the company unfold, which caused its president to resign and the company itself to sharply lose value. However, the recent scandal is instructive on the relation of private capital to the Brazilian state and on how Petrobras serves the interests of the corporate economy. Construction companies Odebrecht, Camargo Corrêa, and OAS — perennial figures in campaign financing — are all investigated for taking part in the bribery scheme that afforded them large public works.

The “national champions” policy intended to prepare Brazilian businesses to foreign markets through subsidies and mergers. It gained the state influence in the economy of South American countries. Zibechi points out that the starkest instances of this foreign aggressiveness of Brazil were felt in Paraguay and Bolivia — the weaker neighbors. He emphasizes that the Brazil-Paraguay relationship changed drastically after the building of the Itaipu dam, that was made in Paraguay rather than Brazil due to a geopolitical move orchestrated by the Brazilian military dictatorship. Paraguay didn’t need the dam nor the energy that was to be generated, which was then sold to Brazil at cost. When the Paraguayan government attempted to revise the Itaipu Treaty, the country was threatened by Brazil’s military training on the border in 2008. Additionally, the Paraguayan military dictator in the 1970s seized about 12 million hectares of land, a large part of which ended up in the hands of foreigners. According to Mark Glauser’s research, cited by Zibechi, 32.7% of the stolen lands are now in possession of Brazilians.

Bolivia’s economy, in turn, is so precarious that the “nationalization” of hydrocarbons in 2006 didn’t change the configuration of their production in the country at all. Eighty per cent of the production of Bolivian hydrocarbons is in foreign hands. Petrobras exploits over 60% of the Bolivian natural gas and 55% of Bolivian oil. The privileged position of Petrobras in Bolivia was attained through the excellent concessions it won during the 1990s in the country. Despite the government’s nationalistic rhetoric, the Brazilian monopolies are well preserved in the country. Equador, which was undergoing a similar process of economic annexation, ended up in collision course with Brazil, expelling Odebrecht from the country in 2008 and Petrobras two years later.

In addition to the “strategic alliances” with Argentina and Venezuela, the general feeling is that Brazil has been building its own backyard in Latin America. The New Brazil doesn’t spell this out, but it should be clear that the Brazilian economic expansion was brought about through economic centralization abroad. In South America, this happened with the securing of monopolies in strategic sectors of neighboring economies through state concessions and bi-lateral agreements that guaranteed privileges and subsidies to Brazilian companies. The expansion of Brazil was made possible by the centralized politics of neighboring states and the economic weakness of their elites.

The debates Zibechi mentions on the character of Brazil’s (sub)imperialism, however interesting, are rather problematic — as all Marxist economics tends to be. Upon commenting on Mathias Luce Seibel’s, Virgínia Fontes’s, and João Bernardo’s work, little time is spent treating the internal consequences of the monopoly state in Brazil. While The New Brazil seemed very impressed by the optimistic prospects floated by the government and corporate groups about economic growth, the country itself pumped the brakes. The model’s extractivism already presented signs of exhaustion: price inflation rises, there are signs of massive overinvestiment in the construction industry, and unemployment grows and is masked by the government’s creative statistics.

None of these facts are surprising. The accumulation of capital, by itself, doesn’t indicate growth. Subsidies to mergers and the diffusion of costs promoted by the state mask the inefficiency of centralized institutions. The accelerated expansion of state tentacles signals that the subsidies to centralization aren’t able anymore to offset the diminishing returns of capital required by “economic growth” in the corporate economy. And given even larger concentrations of capital and even lower returns to scale, the calculational chaos tends to increase and growth tends to get ever slower.

With the end of the halcyon days of the Brazilian corporate capitalism, the state has been forced to do what every economic elite has done in times of decline in their power: increase violence and oppression over the population to try and keep their ability to extract rents to subsidize capital. This has been shown especially in the several manifestations against the increase in bus fares in Brazilian metropolitan areas (which culminated in the July 2013 protests) — repressed energetically — and in the thousands of expropriations during the preparations for the 2014 World Cup and the 2016 Olympics.

Zibechi reserves a few pages to comment on the new political culture that has arisen in the last few years. He talks about the Movimento Passe Livre (Free Fare Movement, MPL), which has adopted a horizontal structure and whose character isn’t so predominantly middle class anymore, expanding in the peripheries of Brazilian cities. MPL has indeed incorporated ideologically the struggle for the right to the city and against the crystallization of power structures in the urban layout, which reserves the center to the rich and isolates the poor to the outskirts. All of that is correct and must be taken into account in any analysis on Brazil. His observations seem incomplete though.

The Brazilian political culture has changed increasingly under the PT administration, starting in 2002. In large part, it has been a reaction to the partisanship of social organizations, which are occupied by the henchmen of politicians.

The Brazilian student movement, for instance, has struggled for years now with a “crisis of representation.” The organizations that represent the movement, ostensibly tied to political parties and vertical structures, do not have the same same power and ability to mobilize that they used to. Even organizations that have strong grassroots bases such as the Landless Workers Movement (MST) suffers with verticalization, bureaucracy, and submission to partisan interests.

The ideological alliance that sustains the capitalist expansion of the Brazilian state, after all, is a tripartite grouping of unionists, bureaucrats and large business owners. The contrast — ever more obvious — between the interests of the base and the top, ideological hegemony has begun to lose legitimacy and vertical decisions are widely resisted.

The manifestations in July 2013 showed the inadequacy of traditional social organizations to deal with the new interests expressed by the people: when multitudes took to the streets with no central organization, structure or even unified demands beyond a general dissatisfaction, a large section of the institutional left began to vilify the movement, calling it “fascistic.”

If there’s any political culture that is characteristic of the current social movements, it’s based on a reaction to the historical bureaucratization and to the isolation of the elites.

The New Brazil is not the only, but it’s certainly one of the most important, recent books that overviews Brazil’s new state capitalism. And in talking about the history of power in the country, Zibechi is certainly much better than most because he sees continuity instead of disruptions. However, despite having the right instincts, and knowing how to identify the key points of contemporary politics in Brazil and in Latin America, doesn’t present a theoretical apparatus capable of challenging the ideological hegemony of corporate capitalism.

The structural weaknesses of the current model can only be challenged by the idea of a radical and descentralized free market. The logical consequence of the horizontalization of our political culture is anarchy.

Anarchy and Democracy
Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory