Reply to Gacek

Another is that only sacrifice by low paid workers, landless farmworkers, civil service pensioners can permit government to put its budget in order and sustain economic growth. A third is the notion that ?state intervention? is a ?classless term? which can be discussed independently of the class interests of those who wield state power and those classes which reap the benefits of ?state intervention?. Finally there is the problem of the central role which non-elected decision makers in the IMF, the Central Bank, Finance and Trade Ministries, and overseas banks play in establishing the parameters and macro-socio-economic policies of electoral regimes, undermining their claims to being democratic, and converting their pre-election programs into post-electoral ?pragmatic falsehoods?.

Orthodox neo-liberal ideologues and the current ?center-left regimes? in Latin America follow this methodology and it is the guiding approach of the Lula regime in Brazil. I will center my discussion on the issues of agrarian reform (or lack of it), public policymaking (authoritarian or democratic), state intervention ? (who does what and for whom?); structural changes versus state clientelism; and foreign policy (independent or dependent).

Agrarian Reform

Lula met with the MST (as did the previous President Cardoso) before and after he was elected President. In both cases he solemnly promised to settle 430,000 families by the end of his term. According to Joao Pedro Stedile, Secretary General of the MST, (December 27, 2004) he has repeatedly failed to honor his agreement. In the first year approximately 20,000 families were settled in expropriated farms. In the second year, approximately 30,000 families were settled, leaving 200,000 landless families living in plastic tents. Every major NGO, peasant and rural organization, the National Bishops Organization and almost all of the popular civil society organizations have condemned the Lula regime?s failure to promote social justice. None of the agrarian reform recommendations put forth by the MST, ecologists, and the Church have had any impact on policy. In interviews in 2003 and 2004 with peasant leaders, bishops and church people, NGO?s and agronomists, I found no one portraying Lula?s agrarian policy as any different from his elite predecessors.

Democratizing Public Policy

Da Silva rules by decree or via alliance with rightwing parties in Congress. He has consistently ignored majoritarian progressive opinion by most popular civil society organizations. He refused to consult with or take account of the vast majority of progressive civil society organizations in (a) co-chairing (with the Bush Administration) the Free Trade Area of the Americas (ALCA); (b) sending Brazilian troops to prop up the US puppet regime in Haiti; (c) supporting the use of genetically modified seeds;(d) promoting agro-business expansion of soya and beef production into the Amazon rain forest leading to the recent destruction of over 3 million hectares of forest; and (e) in imposing a 1% (real) increase in the minimum wage over 2 years. Every major policy was dictated by Lula without any input from civil society, or by the critical minority within his own party. The PT takes its cues from the IMF with which it signed a renewable agreement in 2003 and 2004. Critical differences with Lula?s regressive wage, salary, and pension policies have led to the expulsion of 1 senator and 3 congresspeople from his own party and the suspension and threats of sanctions for others in the parliamentary party who object to Lula?s neo-liberal line. Lula, far from democratizing public policy, as he promised in his electoral campaign, has presided over an authoritarian, elitist regime and a public relations white-washing.

Some supporters of Lula claim that he has changed the role of the state toward a more ?activist role? in the economy and society and eschews privatization. Yet the explicit policy of his Finance Minister Palocci is precisely to privatize all sectors of the economy. As a first step he has moved to open foreign private investment in every sector of the infrastructure, abolishing or loosening regulations and promising to sell off sectors of the strategic and lucrative public petroleum, gas, electrical and financial sectors. Any writer willing to consult Brazilian financial publications or even the English language press (Financial Times, the Economist, and Wall Street Journal) would know that Lula has gone far beyond his neo-liberal predecessors, a point about which Lula publicly boasts. At one point Lula called former President Cardoso (and others) ?cowards? for refusing to slash the pensions of middle level civil service retirees.

The state is active - in promoting agro-business and mineral exports ? benefiting large corporations. They receive 85-90% of the state credits and subsidies at the expense of heavily indebted family farmers producing for the domestic market. The state is inactive in pursuing landlords and their death squads: over ninety peasant activists were killed in 2003 and over 80 in 2004, including over 2 dozen MST activists and several dozen in 2005 (up to the end of April) including a US-Brazilian activist nun. The Church?s Pastoral Land Commission had provided detailed accounts of the agro-businesses implicated and the fact that none have been convicted.

The class background and interests of the key economic policymakers in Lula?s government tells us a great deal about the regime?s pro-big business, anti-popular policies.. The key post of Central Bank Governor is held by Henrique Meirelles, former President of Fleet Boston Global Bank, who voted for President Cardoso?s candidate (Jose Serra) in the Presidential elections. He is a practicing neo-liberal who has been in the forefront of implementing the IMF?s pension-slashing, minimum wage freezing and debt paying, high interest policy. Luiz Fernando Furlan, a millionaire chair of the agricultural corporation, Sandia, is head of the Trade and Development Ministry. Roger Rodriguez, Agricultural Minister, is president of the Brazilian Agrobusiness Association and close associate of Monsanto. He successfully legalized GM farming. Antonio Palocci, the Finance Minister, is an ex-Trotskyist who converted to Milton Friedman and has enthusiastically endorsed the Free Market and received the highest percent favorable rating in a poll of the business elite (85%). Lula?s ?activist state? matches or surpasses any other in Latin (or North) America or Europe in directly representing the business elite. The socio-economic composition of the Lula regime explains why the government paid out over $40 billion USD to foreign creditors while slashing pensions for the great majority of public employees in 2003 and 2004. The regressive policies on minimum wage have nothing to do with ?saving social security? as Lula demagogically claimed but with accumulating an exorbitant budget surplus to pay wealthy bondholders who are a high priority for the big business cabinet.

The social compensatory policies (Zero Hunger) which Lula has proclaimed has been an abysmal failure. The food baskets have sporadically reached 10% of those suffering from malnutrition. The program is administered through Lula?s local political bosses and has been rife with corruption, political favoritism and bureaucratic ineptness. Frei Betto, a close personal friend of Lula and leading advocate of Zero Hunger, resigned and according to close friends and associates deeply deplored the operations and dismal impact of the program.

The gap between deteriorating social and educational conditions and the ?spending claims? of Lula?s regime are manifested in the frequent strikes of teachers, medical and social workers, students and patients over inadequate working conditions, salaries and private sector subsidies. Economists claim that high level administrative overhead costs, bureaucratic incompetence of Lula?s political appointees (most of the funds which are allocated are not distributed) and subcontracted delivery systems run by corrupt political cronies waste most of social expenditures.

Brazil?s National Development Bank (BNDES) was supposed to promote a ?new industrial policy? in opposition to ?neo-liberalism?. Carlos Lessa, its former director and one of Brazil?s most distinguished Keynesian economists recently resigned precisely because he found it impossible to pursue a national industrial strategy in the context of the neo-liberal policy dictated by the Finance and Trade Ministries and the Central Bank. The new director, Guido Mantega, is a political hack who spouts statist rhetoric while financing the growing conglomerates (national and foreign) which dominate the Brazilian economy. The rates of bankruptcy among small and medium agricultural and industrial producers reached new records and are expected to accelerate with the free market policies of Palocci, Furlan et al.

Lula?s Foreign Policy

In foreign policy, the Lula regime has stated repeatedly that it is completely in favor of free trade everywhere. The regimes main criticism of ALCA was that the US would not lift its subsidies on its agricultural exports or quota restriction on Brazilian agricultural or steel exports. That was the main dispute at Cancun as far as Brazil was concerned. In subsequent meetings between Foreign Minister Amorin and US Trade Representative Zoelnick, they agreed to continue discussions to narrow differences within an overall agreement on the ALCA framework, which Amorin called ?ALCA-lite?. This is all public record: Pro-Lula apologists overlook these facts when they claim that Brazil undermined ALCA ? a claim that would surprise most Brazilian trade officials. Lula has supported the US piecemeal implementation of ALCA via bilateral agreements with Peru, Chile, Ecuador and Colombia.

Lula?s decision to send 1500 troops to Haiti in 2004i to defend an illegal puppet regime imposed by US military force is clearly an indication of Brazil?s opportunist policy of catering to US hegemonic interests in order to obtain US support for a seat in the UN Security Council. A Brazilian General heads the occupation forces under the political directives of the US State Department and Pentagon ?advisers?. Under Brazilian military leadership, scores of elected parliamentary and local officials supporting former constitutional President Aristide have been killed, injured or jailed by the newly ?reformed? paramilitary, military and police forces. Hundreds of Aristide supporters among the slum dwellers have been murdered and their neighborhoods have been terrorized. Every major independent human rights group and most civil society activists have condemned human rights violations under the puppet regime and the ?United Nations? mandated, Brazilian-led ?peace? force. Lula has not only defended his role in the colonial occupation, he has promised to repeat the action if called upon by the United (States) Nations.

As far as relations with Venezuela, the less said the better. Lula?s Foreign Minister, Amorin, organized the ?Friends of Venezuela? to mediate the internal conflict between the elected government and the authoritarian opposition. It was made up of countries hostile to elected President Chavez. Among the ?Friends of Venezuela? was President Bush, active through the National Endowment for Democracy and its trade union ally, the AFL-CIO, US Ambassador Charles Shapiro and the CIA in plotting the overthrow of Chavez. Lagos of Chile and Fox of Mexico are diehard neo-liberals who have no affinity for Chavez. And Brazil? They legitimated the pro-coup opposition by offering to ?mediate? between an elected President and an opposition intent in overthrowing his regime. When Chavez complained about the biased nature of the ?Friends? and asked to include a few countries less hostile, Lula-Amorin refused. The ?Friends of Venezuela? stands as an epitaph to a decidedly unfriendly Brazilian policy gambit.

Real Alternatives

What are the alternatives to Lula?s neoliberal policies and regime? First we must reject any deterministic method ? which takes the policy parameters out of Brazil and puts them into the hands of the financial markets. The alternatives begin first of all by changing the composition of the regime, the class interests it serves, its ideology and the membership of its Economic and Social Council (two-thirds dominated by business) and coalition with rightwing parties. Assuming a democratic leftist government with a reformist agenda, there are a multitude of alternatives presented by most of Brazil?s leading economists as well as spokespeople from the leading popular civil society organizations.

First of all, set a ceiling or debt moratorium on foreign debt payments. Secondly retain foreign exchange earnings and place a surcharge on agro-mineral export sales and revenues. Thirdly tax financial transactions, especially speculative ?investments?. Introduce an effective tax collection policy on the capital gains and income of Brazilian elite. Re-nationalize mining, public utilities, communication banking and other lucrative sectors.

Together this should provide a reform regime with between $100 to 200 billion USD a year in new revenue to finance an agrarian reform which would reduce unemployment and disguised unemployment from 40% to less than 10% in four years, increase food production for local consumption, and lessen poverty (mostly, but not exclusively, concentrated in the countryside) by providing the tools (land, credit and tech assistance) for collective improvement (rather than food basket handouts for the few from the State). The added revenues from income tax could be used to fund public productive enterprises linking agriculture and mining to industry, adding value, jobs and increasing employment. The re-nationalization would lead to retaining over $15 billion USD in profits and could allow for a reduction in public utilities cost and make electricity, clean water and power generation available and accessible to millions of poor families and small and medium size private enterprises.

An industrial policy based on public ownership of strategic economic sectors would give high priority to producing goods for popular consumption and financing ? public housing, public health, subsidized public school attendance and other measures to lessen the grotesque inequalities that continue to grow under the Lula regime (the number of millionaires grew from 76,000 to 85,000 between 2003-2005).

There is no empirical basis for assuming the catastrophic assumptions which the Lulistas use to justify their pro-business policies and big business appointees. Brazil?s economic position was not on the verge of collapsing ? it was stagnating; its financial position was vulnerable to speculators and has continued to depend on the entrance of hot money. Brazil?s 4.5% growth in 2004 was largely based on volatile commodity prices. Above all, there are many alternatives to the top-down decision making practiced by Lula, the IMF and his corporate cabinet members. Civil society organizations, like the MST, many of the community-based organizations and the dissident militant trade unions practice an assembly-style democracy which are ?micro-models? of effective democracy.