The Economic Consequences of the Rio Grande do Sul Floods

By Diego Viana

The southernmost state in Brazil, Rio Grande do Sul, was under heavy rain and flooding for several weeks in May. The Guaíba, the most important river in the region, which flows through the capital city of Porto Alegre is usually about two meters deep. It went over five meters. More than 400 cities (out of about 480) were hit by this climate catastrophe, with over 2.1 million people affected and over 170 casualties so far. Material losses are hard to calculate at this point, but insurance companies already consider this the "worst event in our history" and the government estimates that reconstructing the Rio Grande do Sul will take several years.

The connection between the climate catastrophe and the rise of a suicidal far Right immediately becomes evident as social media in Brazil is overrun with swarms of outright lies, political accusations, and fraud. Meanwhile, intellectuals get stuck in a somewhat sterile discussion about whether one may refer to the people who have lost their homes and belongings as “climate refugees” — because it is shocking to realize that this term may refer to people other than the poorest among the poor.

Horrifying events like this have been occurring at increasingly shorter intervals, as we all know. Simultaneously with Porto Alegre, parts of Afghanistan, Kenya, Texas, the United Arab Emirates, Italy, Germany and California have also been under water. Not to mention droughts, wildfires and hurricanes. But in the midst of this chaos, two lessons about our shared future stand out, which may be helpful beyond the regions directly struck, giving us a preview of how to build a future that would be different from what is being prepared right now.

Postponing an exam

The first lesson regards the possibility and requirements of large-scale planning. It so happens that the Brazilian federal government was planning a massive recruitment exam for the public service, which has been anemic after almost a decade of neoliberal rule. The tests were to take place on Sunday, May 5th, in more than 200 cities across the nation with 2.14 million candidates competing for 6,640 jobs. But then the rain came, and it turned everything upside down: how can you administer such an enormous test when many contesting for those public jobs are isolated, stranded, and homeless?

After a week of hesitation, and just two days before the tests, the government finally convened a press conference to announce what was obvious to all: the "National Unified Recruitment" was postponed and later rescheduled to August. Maybe it is just a predisposition on my part, but while I watched the conference I felt that the officials, ministers Esther Dweck (Public Management) and Paulo Pimenta (Communication), seemed somewhat astonished, maybe dismayed. Even among the journalists, there was, or so I felt, an atmosphere of disbelief.

This discomfort is not entirely surprising, though. For someone who had been planning an ambitious, country-wide operation, involving logistics, security forces, and millions of people, I can imagine that the idea of ​​having to postpone the tests didn't even cross the organizers' minds. In fact, a reporter did ask about provisions for an eventual postponement of the exam. There were none.

The federal government placed this initiative at the top of its priorities. It is boasted as an innovation in public sector recruitment, which it is indeed. But it is also an expensive and risky undertaking that had to be stopped in a hurry because nobody considered the intervention of natural forces. Even the decision-making process hints at the impasse the authorities were put in due to the floods. When the press was summoned, dozens of lives had already been lost, and entire municipalities were almost unreachable. It was clear that the "gaucho" (residents of Rio Grande do Sul) candidates were excluded from the test. If communication to the general public only occurred on Friday afternoon, it is because demobilizing this colossal apparatus is almost as hard as assembling it. I suppose that even the budget law will need to be amended.

The postponement made painfully and pathetically clear that in times of global connectivity and interdependence, an episode such as a natural disaster is never “only itself.” It is not limited to its immediate causes and direct effects, where it happens, nor is it limited to its own regime of existence. In a world of complexity, every system and every event spreads and contaminates other aspects of reality, other systems. The eruption of the concrete, palpable, real, into the universe of planning, abstraction and bureaucracy perfectly illustrates the reality we are entering.

I want to draw attention to the meaningful difference between this catastrophe's domino effect and two other consequences of the flooding. First: Rio Grande do Sul is an important producer of rice, wheat and cattle. It is clear by now that the output of these commodities will be compromised, putting pressure on prices. This has led the federal government to announce that it will resort to the international market. Shock waves can also reach interest rate decisions and, with a spike in inflation, unpleasant political consequences are not out of sight, with the far right constantly on stakeout.

Second: the fact that, per the insurance companies, the destruction of cities and plantations in Rio Grande do Sul is the “worst event in the history of Brazil.” The costs incurred could sap some of these institutions and is likely to lead to a significant reallocation of resources, which would weaken other public policies. As for insurance, as has been predicted for some time, we can expect a progressive and heavy increase in premiums, making investments of all types more expensive, especially the most ambitious and expensive ones, such as infrastructure.

In both cases, we are dealing with long-term issues, but mostly already advanced and priced. It is common to hear from economists and managers, but also from some scientists dedicated to complex systems, that the global interconnection of logistical, financial and economic systems makes it possible to overcome ruptures and failures that eventually appear in some part, guaranteeing the stability of the whole. The reference usually evoked is the initial 1966 Arpanet project, the embryo of the internet: decentralized and increasingly numerous connections are almost impossible to take down.

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Nonetheless, other scientists linked to complexity also warn that these ultra-complex systems, although resilient, are vulnerable. This means that they can resist deformation and remain stable, but if a particular disturbance, small as it may be, turns out to be capable of compromising the system, it will collapse completely and suddenly. In a dangerous but not absurd analogy: this is what happens in the death of an organism, for example, or the collapse of an ecosystem. To return to the Arpanet reference: the problem is not always in preventing transmissions from being interrupted. It may lie in the transmission itself. This is what Edgar Morin had in mind back in the 1990s, when he coined the term “polycrisis,” now taken up by historian Adam Tooze and theorized by the Canadian think tank Cascade Institute.

The postponed exam is suggestive of the increasing difficulty we will have in planning and articulating large-scale projects and programs. Without taking into account the climate factor, which is less and less “imponderable,” the government wanted to carry out a broad and solid initiative — and discovered that it was fragile. It won't be the last time something like this happens. This is at the core of what we have come to call "the new normal": from now on, the norm will be that all planning will be subject to failure for reasons that will fall from the sky or emerge from the depths, not without warning, far from it, but with warnings we may not be able or willing to hear.

Solidarity, distribution and economy

What then? — I thought, as I completed the previous section. Do we simply sit and cry, waiting for the moment when a calamity reaches us too? What does all this, the coming crisis of planning, imply for workers, proletarians, the wretched of the earth, and international solidarity in general?

This brings me to my second point. There has been a remarkable outpouring of solidarity in Brazil since the magnitude of the catastrophe became clear. Of course solidarity always emerges when one of these disasters occurs, and there have been many in various regions of the country: landslides in the Southwest, droughts in the North, fires in the Amazon and the Pantanal region, floods all over. But this time there is something different due to the sheer magnitude of the event.

No previous environmental disaster affected the infrastructure of modern life so deeply in Brazil. Airports closed, with runways sometimes inaccessible even for the planes carrying vital aid. There are broken dams, isolated cities and neighborhoods, roads cut, and power, telephone and internet networks down. The distribution of food, medicines and clothing in this scenario can be a daunting challenge. And it has indeed mobilized organizations from all around the country, in the form of donations, logistic networks and information centers.

While this parallel economy was taking shape, representatives of the private sector and the State governor Eduardo Leite himself were more preoccupied with the possibility that donations would have a deleterious impact on local commerce. I mention this not because I want to smear Mr. Leite as someone insensitive to his people's suffering — though one must admit he is indeed responsible for withholding funds marked for preventing floods — but because it presents us with a pulsating contrast between different kinds of economic logic. And this contrast is likely to intensify in the near future, suggesting what may amount to a paradigm shift.

I am thinking about a distinction that Karl Polanyi, the Austrian-Hungarian socialist political economist, makes in his masterpiece The Great Transformation, published in 1944. According to Polanyi, in the history of human societies, there have been three major principles of economic practice, in the sense of the production and distribution of the means of livelihood. These are: householding, which accounts for a mostly autarkic existence; redistribution, in which a central instance, such as the Mesopotamian empires, amasses the goods produced by the collective as a whole and redistributes them according to its own criteria; and reciprocity, of which trade is a particular case, and designates a system where different parties exchange their productions either through a price mechanism or a gift system.

Polanyi argues that a central element in the emergence of capitalism is the dominance of market exchanges over all the other systems. He says the market economy is disembedded from society in general. There is still some room for householding, as the nuclear family is responsible for many activities that are crucial for economic life, particularly the reproductive and unpaid labor ascribed to women. From the institutionalist perspective, the capitalist firm also absorbs a chunk of what would fall into the category of householding. Redistribution still exists too, especially under the form of grants, by both the state and the corporate sector. And non-market forms of reciprocity can be found all over, including gifts, favors, and the occasional barter. But they are all subjected to the general logic of monetary trade, their worth is calculated according to their link to markets, their position in economic life is below secondary.

Very well, what does this have to do with the disaster in Brazil and the solidarity that has been manifested since it began? The answer is, I believe, that the initiative to organize donations, which will become progressively more common as the climate crisis unfolds, contains the seed of a future recomposition of the three economic logics. When a breach in the regular market distribution of goods and services leads to a surge of solidarity, alternative economic circuits emerge spontaneously, simply because they must. This has been the case in emergency situations that had nothing to do with the climate, such as the Argentinian collapse in 2001, wartime scenarios, and the fall of the Soviet Union. Forms of householding, with families tending to their own needs; redistribution, with central committees organizing rations; and forms of non-monetary reciprocity, or alternatively monetary reciprocity, such as the “trueque,” came to life.

In all of these cases, the relative stabilization that succeeded the trauma reestablished the market mechanisms, and these other forms died down. The same happens with every environmental calamity in Brazil and elsewhere: circuits of donations and redistribution arise and dissolve just as quickly. But this time the scale is much higher, the needs more urgent, and the response is proportionally more ostensible. Makeshift centers for collection, transportation and distribution of aid packages are set up overnight, with a remarkable capacity of coordination. Online platforms dedicated to identifying particular needs and connecting them to donors have been created. Volunteers flock to the affected areas, but given the magnitude of the destruction, can only actually act when coordinated with other groups with better knowledge of the region.

Of course these initiatives also tend to wane as the situation improves. But we must take some things into account. To begin with, we are so used, at least since the Communist Manifesto, to think of capitalism as infinitely resourceful, ruthless, and awe-inspiring, that we can forget it has its own internal fragilities. While it may be easier to imagine an end to the world than to capitalism, as Fredric Jameson once said, capitalism still needs the world to be in place, and relatively stable. Disaster capitalism, in Naomi Klein's words, may bloom with the occasional landslide or earthquake, but if people lose the capacity to sell their workforce and purchase their livelihood, the market becomes groundless.

Also, the experience of those who engage in these distributive acts of solidarity represents a valuable acquisition of knowhow and habit. In time, the practice of non-market economic logics may very well solidify, at least from the side of distribution, if not production. As the environmental calamities unfold, as they are expected to do, on the one hand the capacity for large scale planning, corporate or governmental, will be shaken. But on the other hand, it is predictable that the recourse to alternative arrangements will lose its alternative character and constitute a permanent response. Of course, this will require further learning and the development of intellectual tools and strategies.

It is obviously sad to realize that the perspective of non-capitalist arrangements becomes realistic due to the accelerated degradation of the conditions of life on Earth as we know it. The mere fact that we have reached such a stage is a testimony to our incapacity to build large-scale and long-lasting alternatives to the radical capitalism of the last half-century. We should be clear about the fact that the environmental crisis is not an opportunity for change; instead, change is the only way out of the calamities that come with the degraded environment. But it requires careful work of construction, from the ground up. And this is why we can look for inspiration in the spontaneous emergence of solidary economic arrangements in Southern Brazil.

Diego Viana is a Brazilian economic journalist. He earned his PhD in political philosophy from the University of São Paulo and covers Brazilian politics, economy, and social conflict.

"I Don't Believe Capitalism Can Be Fair": An Interview with Clara Mattei

[Photo credit: AFP via Getty Images]

By Diego Viana

Where capitalism goes, austerity invariably follows. This phenomenon has puzzled intellectuals for generations. Why does the dominant economic system consistently adopt reforms that seem to destabilize its very foundations?

Dr. Clara Mattei is a renowned scholar and professor of economics at the New School whose research tackles this question. Her latest book, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism, argues that austerity isn’t “a policy mistake” but is instead a core feature of capitalism. 

Her analysis concentrates on Europe in the years immediately after World War I. Following the armistice, European workers had a rare moment of revolutionary fervor, spurred by the recognition that war governments were perfectly capable of managing the economy beyond the imperatives of profit.

Dr. Mattei argues that, from 1920 to 1927, austerity was instrumental in upholding European capitalism. It accomplished this via three tools: fiscal, monetary, and industrial policy. The trinity entails, respectively and roughly, cuts in social expenditures and regressive taxation, interest rate hikes, and labor suppression. Neoclassical economists like the United Kingdom’s Ralph Hawtrey and Italy’s Maffeo Pantaleoni worked hard to argue for these policies. Ultimately, though, implementation required the break from democracy and political violence that enabled Benito Mussolini’s fascist regime and the development of a fascist mindset which later spread across Europe.

Last month, Hampton Institute contributor and economic journalist Diego Viana interviewed Dr. Mattei about her thesis and worldview. Please enjoy the following transcript, which we have edited for clarity and length:

Diego Viana | Your book argues that austerity is central to the capitalist order. How do current mobilizations figure into this argument?

Clara Mattei | They make the book very topical! Look at the United States. People are mobilizing. And it's not just the strikes. Workers are questioning wage labor altogether. This happened after World War I, when the state politicized the economic realm by intervening in it as part of the war effort. And it’s happening, to a lesser extent of course, again today. Folks got a taste of life without exploited work during COVID when the government offered some social support. Why should they return to work in such horrible conditions now?

That’s where austerity enters the picture. It increases our dependence on markets. That’s typical and specific to capitalism. Most people only have rights if they have money in their pockets that they acquire through wage labor. By cutting social benefits and weakening workers' bargaining power, austerity seeks to ensure no alternative but to bend our necks and accept exploitative conditions.

DV | Nevertheless, mobilizing workers remains difficult due to precarity, reduced union density, etc. Is victory possible?

CM | Your analysis is accurate. It speaks to the “success” of austerity. A half century of hardcore measures has made labor precarious, with fewer union rights, less welfare, and more privatization. Interest rates are rising too, which limits ordinary people’s access to credit and produces more unemployment. Yet people are still mobilizing. True, unions are weaker now than they were after the Second World War — and definitely after the First. But our system is based on exploitation of the majority. So, whenever this majority mobilizes, it's a big deal.

This October the United Auto Workers secured a more generous and progressive wage structure following a 45-day strike. This victory is very serious. And it shows that — when push comes to shove — capital needs workers, who thereby have tremendous leverage to win demands. So —  wherever they are — if workers withhold their labor, that frightens capital.

My book talks about the weapons of the State and its political and economic elites to wage class war against the people. But the book is also optimistic. It recognizes that class struggle is ongoing and workers can win. Indeed, capital as wealth requires capital as a social relation — namely, wage slavery. This means that, so long as we have capitalism, the fight continues. Of course, there have been historical moments when workers were in retreat. But I think now we’re seeing that austerity doesn't mean the death of workers. Austerity is a tool to keep workers in check. In that sense, it acknowledges their power.

DV | Many American economists believe recent stimulus plans mean the age of austerity is over. You push back against this by conceptualizing fiscal, monetary, and industrial policy as a trinity of tools to enforce austerity. Explain how that trinity operates in our current milieu.

CM | The trinity is operating at all levels. Hiking interest rate disciplines workers by “loosening” a tight labor market, which simply means increasing unemployment. And that is exactly what the Fed aims to do. They want unemployment to keep workers desperate enough to accept low wages. That's a really powerful weapon right now. Even if it hasn’t worked yet, it will. The recession is coming. The recession is a short-term cost for a much longer-term gain, which is stabilizing class relations.

DV | How about the fiscal side?

CM | I try to break from mainstream definitions of austerity. People equate it to budget cuts and tax increases. This means nothing. It’s the typical practice of economists to look at the aggregate, disregarding the class dynamics of who wins and loses. But this approach leads to mistaken conclusions — like the idea that austerity is behind us. The state is spending a lot of money, after all! The crucial point is that austerity does not mean “small government” but it means that the government is actively intervening in favor of the elites and to the detriment of the many. 

So fiscal austerity is central, and Bidenonomics is a good example. The public budget expanded. But where did the money go? It went to war, the military-industrial complex, and  energy companies to incentivize them to go green — and, of course, bank bailouts. The state is spending money but giving it to capital owners while structurally defunding social services. For me, fiscal austerity is about social expenditures — not state expenditures generally.

DV | So austerity is compatible with considerable state spending?

CM | Yes! The point is where the state spends. And it’s spending not on the people but the market. It’s commodifying basic services. Joe Biden has done nothing in terms of social redistribution. And his fellow Democrat, Eric Adams, the mayor of New York City, has just announced massive cuts to social spending, spurred also by the fact that interest rate hikes make it more expensive — especially for local governments — to borrow.

So, there, we see the connection. The elements of the trinity reinforce one another. Monetary austerity is reinforcing fiscal austerity. And then there’s the other side of fiscal austerity, which is not just about social expenditure cuts but also regressive taxation. Who is paying the taxes? Again, we’re seeing constant increases in consumption taxes and a total unwillingness to tax capital, profits, inheritance, or any form of wealth. This is very structural. And it’s not unique to the United States. In Italy, Prime Minister Georgia Meloni is doing the same. It's worldwide.

DV | The third element is industrial austerity, particularly in the form of repression.

CM | Biden’s administration can try to give the impression of being pro-labor but it's able to do very little to combat privatization and labor deregulation. It has actually even intervened in a quite cooperative way to block railway workers from striking to achieve better rights last winter. The wins today are coming from organized labor — not the administration.

In other countries, industrial austerity is more present than ever and unions are suffering. Work is getting increasingly precarious. Austerity is really about class — it is about the state’s management of the economy in favor of the elites.

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DV | Beyond explaining austerity, you put it at the core of the capital order — the very structure of capitalism itself. Is this a renewal of Marxian economic thinking?

CM | Yes. My work aims to use Marxian methodology, which understands economic relations as inescapably political. This naturally leads to a complete rethinking of austerity. I want to help people realize that the relationship between capitalism and austerity is structural. And this means that the state is constantly intervening to weaken workers and protect capital. Analyzing how austerity works in real time totally confirms this.

Now more than ever, we must heed the most important insight of Karl Marx's critique of political economy. Marx described how economic growth is founded on capital as a social relation. The majority of people must sell their labor for a wage and this is not at all a natural feature Value creation under capitalism ultimately requires exploitation. While a lot of people — even on the Left — take capitalism for granted, capital is based on a specific social relation. That means it’s not only very political but also inherently fragile. This is why it needs constant protection. There are certain historical moments in history in which that fragility emerges.

DV | You describe a change after World War I in which the spontaneous austerity of Gilded Age capitalism had to become managed and coordinated, hence the Brussels and Genoa conferences. Is this the bedrock of later institutions like the Bretton Woods system or the G7, the World Economic Forum, the World Trade Organization?

CM | Exactly. And I think the book doesn’t do justice to the ways in which political institutions prior to the War were actively preserving austerity. There's plenty of literature showing how the gold standard was not a natural mechanism. It was actually quite politically encased. What I argue in the book is that austerity became visible after World War I.

Austerity is always latent in capitalism and emerges when the system is most contested. When its pillars shake, institutions coalesce to protect the capital order. That's why I focus on 1919 and the period right after World War I. It was a moment in which indeed there was a lot of demand for economic democracy.

In Britain, besides universal suffrage, people demanded a greater say in economic issues. They understood the pretext of balancing budgets was purely ideological and no longer tenable. During the War, states spent all the money they wanted. So people were asking for a post-war reconstruction in which resources were utilized in their favor rather than for profit making.

In these moments of political crisis, austerity refines its tools. Many institutions sprung into action in the early 1920s — especially independent central banks — to insulate monetary decisions from democratic intrusion. I focus on this period in the book. But my next project is to examine how austerity operated after World War II. So austerity could be an angle to rethink the history of capitalism in the 20th and 21st centuries.

DV | The book’s subtitle is about austerity paving the way to fascism. In the case of Italy, the opposite seems to have happened. Fascism paved the way for austerity. What do you make of that?

CM | A common idea is that fascism emerges as a reaction to austerity. But you’re right. In Italy, something different happened. The original fascism — Benito Mussolini's fascism — swept to power because of its capacity to implement austerity. Fascism and austerity needed one another. The authoritarian state was able to enforce austerity much more effectively than any democratic government. Unlike its liberal counterparts, it could intervene directly to repress wages, curtail strikes, and implement a whole slew of social cuts and privatization while jailing opposition. That’s why, as I describe in my book, neoclassical economists were very excited about Mussolini. He imposed their pure models on reality. 

Mussolini was a response to the fact that, shortly before the March on Rome, there were full-blown factory occupations. Workers were gaining lots of rights and crumbling wage relations in favor of democratic management of industry via factory councils, of which Antonio Gramsci was a very important leader. The elite couldn’t have that. Fascism was a godsend. Montagu Norman, who was the governor of the Bank of England, said, “Fascism has surely brought order out of chaos… The Duce was the right man at a critical moment.”

Norman said this in 1926, when the regime had already shown what it meant to be a fascist regime — killings and all. But he liked that fascism was all about suppressing wages, defending private property and investment, and using the state to keep industrial peace to maximize profit above everything else.

DV | How do you see the link between fascism and austerity today?

CM | Today, a lot of fascist or authoritarian governments come to power promising no austerity. Indeed, people feel the economic violent impact of austerity on their daily lives and desire something different. However, because of austerity’s preeminence, people have lost class consciousness and believe they can trust bourgeois politicians — especially the lie that it's all the fault of migrants. So there's an inability to see what’s at stake, because class struggle is never discussed.

Italy today is emblematic. Citizens voted for Meloni’s far-right government because they promised change. However, there's complete continuity between the liberal technocratic governments of former prime ministers Mario Draghi and Mario Monti  and the current one. Meloni's Minister of Finance is Giancarlo Giorgetti from Bocconi University — the same guy who was there with Draghi! And Meloni’s budget for the coming fiscal year is pure austerity. She’s defunding hospitals and schools, eliminating the subsidies for the poor called reddito di cittadinanza, expanding regressive taxation, and privatizing while pushing for further labor deregulation. It's the whole austerity trinity — except for monetary policy, which is managed by the European Central Bank. This is no shock. Historically, when it comes to managing the economy, liberals and fascists have been allies. That's still true. Their authoritarian tendencies may surface in different ways. But, ultimately, the two camps are pushing in the same direction.

DV | Since WWI, has anyone defeated the drive toward austerity?

CM | Not to my knowledge. While 1919 was a really exciting year both for the reformists, who passed many welfare initiatives, and the more radical workers’ councils, who called for workers’ self-governance, this did not last long. Even in revolutionary Russia, Vladimir Lenin’s New Economic Policy basically acceded to some form of austerity. The Soviets had little choice. To compete globally in a capitalist system, they had to deflate their economy. From the 1920s onward, it’s been quite austere all around.

DV | Couldn’t that ingrain a sense of powerlessness? Recall Fredric Jameson's formulation. “It's easier to imagine an end to the world than an end to capitalism.”

CM | I hope the message of the book is actually the opposite. The fact that we think there's no way forward outside of capitalism speaks to the “success” of austerity. If you break out of austerity, you're breaking out of capitalism. We need to think big, but this doesn't mean that it's impossible. There's a huge amount of movements going on even now as we speak that are about achieving independence from market forces. Look at La Via Campesina, a movement that unites farmers throughout the South of the globe to demand workers’ sovereignty in food production or the neighborhood councils in Chile that mobilize to organize resources democratically and had a big role in the Chilean constitutional process before it was tanked by their supposedly left-wing government. Organizations like these are rekindling democratic engagement in the production process and ecological sustainability.

Now more than ever, we must rethink what type of state we want. The capitalist state is clearly one that must do austerity. And this is also clear for other systems that had to compete in the global order. Even globalization is unnatural and politically constructed. But everything that's actively constructed can also be actively deconstructed if people participate. And this is why I think those on top are constantly concerned. They know that the system is fragile. Although they’ve used neoclassical economics to convince us it isn’t. But I believe in the power of workers to think bigger and defeat capitalist realism.

DV | Economists in the last decade have become smitten with cash transfers, basic incomes, taxing capital flows, etc. as antidotes to economic malaise. These proposals are mostly encased in the framework of neoclassical microeconomics and liberals seem excited about them.

CM | I think those proposals are quite naive. They assume you can have the best of all worlds — a sort of “fair capitalism.” I don't believe capitalism can be fair. In a capitalist economy, the state’s ability to redistribute is necessarily limited — especially politically. These economists fail to see that. Otherwise they’d understand that a livable universal basic income would be a revolutionary measure. Society would cease to be capitalist. Some neoclassical economists, especially those who work at the Federal Reserve and International Monetary Fund, are perfectly aware of this. That is why they often block such policies.

DV | Have you debated other economists who criticize austerity, but consider it merely a bug and not a feature of capitalism?

CM | It's hard to have these debates. Economists generally believe the political and economic realms should be separate. They think I’m not really doing economics because the discipline is ontologically founded on that separation. But that’s an artificial, ideological divide. It’s ideological in the sense that it perpetuates illusions which help foster consensus for the system. Even colleagues at the New School, whose economics department is amongst the most radical, separate politics and economics. The dominant creed is that doing economics has little to do with the actual social relations of production.

DV | After World War II came the Keynesian era of the welfare state and managed capitalism, where wages and capital returns grew at similar rates. Why didn't we see the wave of austerity and fascism that followed World War I?

CM | This is a very important question and is indeed the guiding one of my next book project with the University of Chicago Press. I can start providing a very preliminary answer. The revolutionary spirit of 1919 was not as palpable after World War II. Workers became more integrated in the capitalist state apparatus. This was the great success of Fordism — the system of mass production and consumption characteristic of “developed” economies. Fordism got workers to accept exploitation in return for somewhat higher wages and moderate social benefits. In moments when political upheaval is weaker, states can undertake more ambitious redistributive efforts without risking subverting the entire system. By contrast as I show in my book, after World War I, reconstructionists tried to appease the population through welfare reform. But, in moments of more heated challenge to the pillars of the system, they weren't successful. Rather, their reforms instilled in workers a greater sense of possibility. Getting something caused the majority of citizens to demand more — perhaps even an overthrow of the whole system. Why just accept the lengthening of the leash? 

After World War II, the revolutionary surges weren’t as powerful. This enabled the reformist vision of giving a little without challenging capital accumulation as such. That’s their political project.

Consider the policies implemented after World War II. The term "austerity" was popularized by Britain’s Labour government in 1948. Why? Because they prioritized the inflationary threat. In the historical trade-off between inflation and full employment, they chose to tame inflation. This led to a huge wage freeze in 1964.

Policymakers in Britain, the United States, and Europe were always concerned with compressing wages to avoid diminishing profits and private investment. Monetary stability and international competitiveness were sacrosanct. Sure, profits were so high that real wages grew alongside them. But how much space was there for more structural distribution of resources?

All this makes you question the supposedly great divide between Keynesians and Hayekians that I intend to explore further. Neither John Maynard Keynes nor Friedrich Hayek theorized about exploitation or understood capitalism as the problem. That’s why Keynes sought to optimize the system rather than replace it with something better. Let’s not make the same mistake.

What Latin America Can Teach About Political Instability

[Pictured: A group of fascists march in Brazil in 2019, with hopes of reviving Brazilian Integralism]

By Diego Viana

For a Latin American like me, a certain anxiety currently expressed by liberals and social democrats in the wealthy West is intriguing. Op-eds in the mainstream media and book titles in political science set off the alarm: democracy, often designated our democracy, is in danger. Why? Because centrist political forces are gradually losing their capacity to determine the terms of the debate and the universe of what is possible, election after election, opinion poll after opinion poll. Meanwhile, the social landscape is transformed by an increasingly aggressive far Right and the return of the Left to the streets around 2011, after a somewhat dormant decade. It is true that political, economic, and social leaderships with little esteem for a democratic veneer are clearly on the rise. It is also true that mass protests and barricades are back in the game. Yet, seen from my part of the world, these trends are remarkably familiar.

It is tempting to reduce the complexity of current political tendencies by jamming them all into the single narrative of “rising populism,” as mainstream political scientists and journalists in the West so often do. It is comfortable, but hardly elucidating, to melt such names as Marine and Jean-Marie Le Pen, Éric Zemmour, Donald Trump, Georgia Meloni, Vox, Alternative for Germany (AfD) and the United Kingdom Independence Party, but also Jean-Luc Mélenchon, Bernie Sanders, Podemos, Jeremy Corbyn, and others, into a single political concept, and then contrast them with a liberal center deemed democratic in essence. 

Comfortable, of course, for those who only aspire to lament the slow corrosion of liberal democracy, as witnessed in Eastern European countries like Poland or Hungary. The framework that delimits the trend as a rise of populism or illiberalism conveniently leaves aside the traditional Right's consistent drift further right. France is a good example. While the suburbs burn in protest against police brutality, the traditional Republicans (formerly “Union for a Popular Movement”) send out xenophobic and racist messages and policy proposals. President Emmanuel Macron, in turn, who was once a minister under socialist president François Hollande, then was elected in 2017 with a strictly neoliberal platform, places himself increasingly in the orbit of rightist ideas, hoping to keep right-wing voters within reach. In 2021, he adopted the notion that universities are dominated by “Islamo-leftism.” This year, he repeated far-right novelist Renaud Camus's diagnosis of a “decivilization” of France.

And yet, someone like Macron, who bypassed Congress to sign a pension reform into law despite overwhelming popular opposition, is considered a symbol of liberal democracy. Is it simply because, unlike Le Pen's Right or Mélenchon's Left, he remains a free market champion? Or, likewise, is the Conservative British government, which installed a prison boat to detain immigrants, liberal-democratic because they don't subscribe to the recoil of economic nationalism characteristic of their Brexiteer predecessors under Boris Johnson? If (neo)liberalism itself develops into a strict surveillance/police state, with a distinctly authoritarian horizon, are we still speaking about democracy?

I believe the Latin American experience suggests that the most significant aspect of the current political trend is neither its “populism” [1] nor its “illiberalism,” but its instability. While the usually nationalistic, sometimes ultraliberal, occasionally religious, and often openly fascist New Right has been rising relentlessly, by creating new parties or caucuses inside the traditional ones, the process has not been as steady as it might seem. In the last decade, the Right, Left, and Center have all seesawed vertiginously between victory and defeat. Think of how the AfD in Germany grew during the refugee crisis of 2016, then lost popularity in the aftermath of the pandemic, then grew again. Or how the traditional Left won the French 2012 elections, only to be practically wiped out in 2017, replaced by Mélenchon's France Insoumise, which has now become the centerpiece of the left-wing coalition NUPES (New Ecological and Social People’s Union) in Congress. Or how the Labour Party reached 40% of the vote that same year with Corbyn as leader, before the debacle [2] that led to the rise of Keir Starmer. Or even the rise of young socialists in the United States, while the obscurantist Right took over the Supreme Court. More recently, in Spain, the Right's inability to form a government with the neofascists from Vox, immediately following a significant victory in local elections, shows that the game is not as linear as is often depicted. Quite the opposite: it oscillates wildly.

Moreover, in most of these countries, opinion polls do not show a clear preference for the nationalist, xenophobic, ultraconservative ideas these groups profess. It is true that they usually don't tip towards left-wing ideas either, such as redistribution or public ownership. Nevertheless, if people in Europe and the United States tend to view the world with a more "centrist" lens, then the loss of steam by the centrist forces becomes puzzling in its own right. Which leads to the good old materialistic interpretation: the political oscillation and the ultra-conservative call may reflect economic insecurities, or, more widely, deeper anxieties concerning living conditions.

The relation between the worsening living conditions and the odd mix of nationalism, racism, bigotry, religious fanaticism, and libertarianism we are becoming used to is not immediately obvious. Sadly, structural relations are rarely obvious. But it is not hard to notice that, in the absence of factors that foster social cohesion — through common experiences, such as work relations and opportunities to consume, which give people a feeling of participation in economic life, and public services, pensions, unemployment benefits etc. — those yearning for belonging may recourse to confrontational forms of religiosity, a renewed strength of white supremacy, or the extreme demands of a neoliberal ethics as it appears in the Silicon Valley way of life, where every aspect of existence is monetized. All of these seem to be fusing as the contemporary face of fascism.

Which brings us back to Latin America, this old periphery of the Western colonial powers (the United States came up with a much cruder term: “backyard”). Here, political oscillation has been the rule in most countries, not in the sense of what in the region is usually called the “healthy alternation of power,” but violent swings between oligarchic (and, more recently, neoliberal) and progressive forces, with a constant risk of authoritarian slides. The 1990s were a nearly monolithic neoliberal period in the region, succeeded by two “red (or pink) tides,” when a series of somewhat left-wing parties took power in many countries almost simultaneously. In between, a conservative interregnum took hold, either via elections or coups — explicit or not (Honduras in 2009 [3], Paraguay in 2012, Brazil in 2016, Bolivia in 2019).

The Argentinian case is probably the most extreme, as the country is still grappling with financial asphyxiation due to the insistence on a one-to-one parity between the peso and dollar from 1991 to 2001, and the  “rescue” packages from the International Monetary Fund (IMF) that followed. In the last decade, the left-wing “Peronista” president Cristina Kirchner was followed by the businessman Mauricio Macri in 2015. Macri then fell out of favor with the electorate due to an inflationary hike intensified by yet another IMF package, and the left-leaning Peronistas [4] regained the Casa Rosada in 2019 with the current president Alberto Fernández.

This year's electoral process has a particularity. In the primaries (where voting is open to all and mandatory), the libertarian, discreetly fascist candidate, Javier Milei, received 30% of the vote, ahead of the traditional right-wing opposition (28.3%) and the governing coalition (27.3%). This means that Milei's prospects of actually becoming president by the end of the year are far from unrealistic. At the time of writing, he’s the betting favorite.

In Brazil, a decade of turmoil ended the relatively stable period associated with the post-1988 “New Republic.” This era of stability, whose hallmark is the adoption of an economic stability plan in 1994, was punctuated by the presidencies of center-right Fernando Henrique Cardoso (1995-2002) and center-left Luiz Inácio “Lula” da Silva (2003-2010), whose tenures marked a particularly optimistic time, when Brazilians genuinely felt that the country had reached a new stage of political maturity — if there is such thing. The following decade, which began hopefully and the expectation of the 2014 World Cup and 2016 Olympics in Rio de Janeiro, would turn out to be marked by a series of mass protests beginning in 2013 and political strife.

The apex of this instability came in 2016, when a poorly justified impeachment process sacked Lula's successor, Dilma Rousseff, who faced increasingly vitriolic opposition in Congress, the media, and even heavily astroturfed protests in the streets. The process, which has consistently been denounced as a coup by the Left, installed her conservative vice president, Michel Temer, in her seat. The traditional political forces of Brazil, which includes large landowners, bankers, the very few families that control the media, the high bureaucracy, the military, and what is left of the manufacturing sector, believed this would obliterate the Workers' Party (PT) and lead to many years of center-right governments.

Instead, the 2018 election brought what felt like a preordained victory for a caricatural far-right candidate who promised to “clean up” the country of leftists and, during the pandemic, mocked the victims and imitated a person suffocating to death. COVID killed more than 700.000 Brazilians. Four years later, Lula was back in office, elected by an insignificant margin of 1.8% of the vote, and riding on the widest imaginable alliance.

In the last few years, the oscillation intensified and accelerated. Peru, Paraguay, Bolivia, and Ecuador have faced protests, impeachments, jailed ex-presidents, fascist presidents, and strikes [5]. Chile — historically the most stable South American country — caught fire.

The 2019 “estallido social” (social blowup) during the presidency of neoliberal Sebastián Piñera led to the formation of a remarkably progressive constituent assembly. The 2021 election pitted the young left-wing activist Gabriel Boric against the neofascist José Antonio Kast, with a victory for Boric that may have been his last. Since then, the project of a new constitution suffered a resounding defeat and his approval rates have sunk. 

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In Colombia last year, Gustavo Petro, a former guerrilla fighter and mayor of the capital, Bogotá, was the first left-wing candidate to reach the presidency, with Francia Márquez, a black female environmentalist, as vice president. Petro's party, Humane Colombia (formerly “the Progressive Movement”), is small and had to rely on a heterogenous alliance (Historic Pact for Colombia) to achieve victory. In government, as the alliance shattered with some of the parties failing to vote with the government, Petro and Márquez came under fire from all sides: the regional agricultural elites, the traditional parties (such as ex-president Álvaro Uribe's Democratic Center) and, of course, the media — which, as in many of the neighboring countries, is highly concentrated. As usual, accusations of corruption are the first tactics employed. In Petro's case, they involve illegal drug money in the electoral campaign and spying on his enemies.

In sum, except for Uruguay, where the Left governed for 14 years and was succeeded last year by a traditional, “normal,” neoliberal president, the politics of Latin America are unstable and often nasty. Progressive, conservative, and neofascist governments have been coming and going in many of the key Latin American countries. No particular set of policies seems to be able to take hold. One group reaches power when the others have disappointed their constituencies.

Why are they disappointed? Once again, because of living conditions, which have largely stagnated for at least two generations, beginning in the early 1980s and leading to rural and urban conflicts, underemployment, and that same permeability of the middle classes to neofascist messages as we are witnessing in the West. As the social tissue increasingly frays, those with a certain level of property and wellbeing feel threatened, and it is hardly a surprise that they resort to “saviors” and “punishers.”

And what makes the Latin American case so instructive for the developed West? I would argue that Latin America, being a “fragile” satellite of the Western world, is particularly exposed to the fluctuations that reveal a crack in the edifice of liberal democracy, in the way this form of government has developed over the last half-century.

While a significant portion of humanity has been living under the aegis of neoliberalism since the late 1970s and particularly after the fall of the Soviet Union, it seems that everywhere in the world the mental model of political stability is still the social-democratic system of the post-WW2 period, particularly in Europe, and known in France as “Les Trente Glorieuses,” the three “glorious” decades of growth with distribution, well-paid manufacturing jobs, widespread unionization, and a managed form of capitalism that guaranteed a comparatively high level of social participation in policymaking. In other words, we seem to expect a kind of world, with the living conditions it implies, that belongs to a bygone era. Our grandparents took a certain political security and quality of life for granted, and we still long for that. But it is not within our reach.

Social-democratic parties promise to reconstitute this historical structure, and occasionally win with that message. But they cannot deliver and lose face, support, and credibility. Then come the conservatives, who intensify the neoliberal agenda, only to cause more precariousness and financialization. Then come the neofascists, who generate horror, social conflict, and brutality. And the cycle repeats.

The illusory character of this somewhat rosy depiction of the mid-20th century is well-documented and nowhere more evident than in what was then called the “Third World.” In Africa, Latin America, and Southeast Asia, the voracious quest for raw materials and cheap labor left a trail of civil wars, coups, and massacres. This probably reminds you of the Vietnam War, but the military dictatorships in Brazil, Argentina, Uruguay, Chile etc., all of which were supported by the CIA, are also part of the story. The colonial grip over these parts of the world far outlasted the formal colonial ownership or “protection,” as we see from the Western interventions following independence wars in African countries. To a large extent, the comfortable lifestyle that the West associates with liberal democracy was built on the exploitation of the rest of the world, in a renewed form of colonialism.

What made possible the political balance that characterized the “Trente Glorieuses,” with strong trade unions, rising manufacturing wages, and social mobility (in French again: the “ascenseur social,” or “social elevator”), was the possibility and necessity of class negotiations and agreements. Neither capital nor organized labor could expect to have their way in full — even taking into account the strong communist parties of Europe, whose revolutionary flame was kept as low as possible most of the time. Political systems could remain stable and successful due to this delicate equilibrium. However, the equilibrium in turn was maintained thanks to a fear of the Soviet bloc, an unimpeded flow of cheap oil, easy access to resources and markets in the “Third World,” and the absence of serious economic competition from non-Western countries.

As we know, this model was progressively eroded by several factors. The quick rise in productivity that accompanied the industrial advance waned off, making it harder to keep the wage increases. The rise of neoliberalism eliminated the redistributive mechanisms that could have extended the balance of power between capital and labor for a few more years. The capacity of China and other Asian countries to attract manufacturing jobs with ever higher skill profiles, in part due to the opening of markets known as globalization, broke unions' bargaining power. Neoliberalism first emerged and reached power as a response to the exhaustion of the post-war welfare state, the social-democratic model. But it never truly replaced, even among the Left, the notion of a nearly ideal state of affairs where a certain level of democracy was guaranteed by what the German philosopher Theodor Adorno called “managed capitalism” [6].

What makes Latin America a particularly relevant place to understand where the structural power relations are heading elsewhere is that many of the countries mentioned above have been experiencing a post-industrial kind of stagnation for several decades already, after an incomplete process of economic development undertaken precisely in the period of late colonialism, Cold War, and the belief that industrialization was an infallible catalyst of development. Latin America, which never quite developed the institutions of Western social democracy, has to cope with swollen cities, underemployment and informal work, capital imbalances, crumbling infrastructure, but has poor political means to respond. And it was, after all, the site of the first experiment in neoliberal governance: Augusto Pinochet's Chilean dictatorship.

As a result, neoliberal, progressive, and fascist governments replace each other continually, not always in the smooth manner one expects from the ideals of liberal democracy. Occasionally, promises of improved living conditions can be fulfilled, but only to a limited extent, which is why the success stories are quickly followed by a period of frustration and revolt, leading to power changing hands again.

In this context, it is not hard to see that the authoritarian far Right has an edge. Its advantage comes at a low cost. By promising the past over the future, the known over the unknown, the neofascists of our time are always able to delay satisfaction and simultaneously keep their position by blaming someone else. The worse it gets, the easier it is to repeat the process. While an ultraconservative government cannot provide the quality of life that subsists in people's imagination as a mark of the 20th century — the economic and even environmental conditions are incompatible — it can still renew its promise by blaming non-conforming groups for the slowly worsening conditions of life. Hence, the ghost of communism, the widespread xenophobia, the justifications of racism, misogyny, homophobia, etc. that have become so common in our time. 

The post-WW2 model tends toward utter unattainability. It should no longer be our horizon of expectations. Bleak as this may sound, it is safe to say that the edifice of multi-party democracy is crumbling before our eyes. In a world where energy is no longer abundant, manufacturing does not guarantee safe jobs for the working class, unions are busted, climate change puts crop yields at risk, and the neocolonial control over the rest of the world can no longer be expected, the social-democratic balance is hardly tenable.

The greatest risk is that the dominant classes give up the pretense of democracy and revert to a more explicit authoritarian regime. This is most certainly already underway, if we think of the Republican Party under Donald Trump, Israeli prime minister Benjamin Netanyahu's reforms, the British Conservatives, the Spanish People’s Party, or Macron. Once again, Latin America provides a clear-cut example of this choice, as the Right turns to military and religious leaders in their attempts to regain or extend control over the state.

If we can still hope for democracy, we have to accept that it will not be social democracy and certainly not liberal democracy. Whatever it will turn out to consist in, it must be built from the ground up, and the very process of construction needs to be as democratic as the expected final result. In this respect, the bright side — and it is always advisable to conclude from the bright side — of the Latin American landscape is that this part of the world is also a vibrant cluster of the grassroots political and social experimentation we must nurture. The plurinational constitution of Bolivia, the ecosocialism being developed by the Brazilian Landless Workers' Movement, the strength of solidarity economy schemes in Argentina, and the articulation of indigenous movements in many of the countries show that the authoritarian conservative turn is not a matter of necessity. New models of collective life and social organization are being forged, and this is where we should turn to find inspiration.

Diego Viana is a Brazilian economic journalist. He earned his PhD in political philosophy from the University of São Paulo and covers Brazilian politics, economy, and social conflict.

Footnotes

[1] In its contemporary form, the concept is most often used in a way that corresponds to Jan-Werner Müller's definition as pitting a “pure and unified people” against a “morally corrupt elite.” This is, of course, not a helpful definition if we are trying to understand the inherent instability of the period. I will not discuss this definition, and also leave aside the appropriation of the concept of populism by Chantal Mouffe, Ernesto Laclau, and Pierre Dardot, as the question of defining populism is beside the scope of this text.

[2] The main instrument of Corbyn's downfall was a report that accused him of not handling antisemitism accusations within the Labour Party appropriately. Later, Al Jazeera revealed that the party bureaucracy actively worked to undermine his leadership, which included drafting the antisemitism report. Corbyn was later suspended from the party.

[3] In 2009, the Honduran president Manuel Zelaya was forcefully removed from office by the army, in a traditional coup d'état. In Paraguay, President Fernando Lugo was ousted after a summary impeachment process with only two hours to prepare his defense. The cause was allegedly the insecurity in the country after a bloody conflict between landless workers and the police. This inaugurated the series of “parliamentary coups” that reached Brazilian Dilma Rousseff in 2016. The Bolivian case is different in that it involves the questionable decision by the Supreme Court to allow President Evo Morales to run for a fourth term. After he won the election, accusations of electoral irregularities emerged and the military forced him to resign.

[4] “Peronista” designates the political groups that claim the legacy of Juan Domingo Perón, president in the late 1940s and early 1950s. The reason why one must specify that these “Peronistas” are left-leaning is that there are “Peronistas” of all tendencies, including the conservative Carlos Menem, who introduced neoliberalism to the country in the 1990s. Perón himself tended to favor the right-wing Peronistas. In the 1960s, when exiled in Spain, Perón gave an interview where he was asked to explain how he saw the Argentinian political landscape. He listed the parties but did not include “Peronista” as a category. The reporter reminded him of that, to which he replied: “Oh, but they are all Peronistas.”

[5] I will leave aside the cases of Venezuela, El Salvador and Nicaragua, whose paths are outliers.

[6] A possible reason for this is that the neoliberal agenda transformed living conditions gradually — except in transitioning countries subjected to “shock doctrine” — progressively eroding labor's position in the distributive conflict, in order to uphold Western capitalism's competitive edge. The slow, but sure erosion of the Welfare State and the possibility of what the International Labour Organization names “decent work” seems to sustain the hope for a return to managed capitalism.

Why Is Lula’s Government Environmentally Ambiguous?

[Photo credit: Grist / MAURO PIMENTEL / AFP via Getty Images]

By Diego Viana

On January 1st, 2023, when Luiz Inácio Lula da Silva walked up the ramp of the presidential palace to begin his third term as President of Brazil, he was accompanied by eight people who represented the diversity of the country's population. Among them was Raoni Metuktire, chief and spokesperson of the Mẽbêngôkre people of Northern Brazil (popularly known as “Kayapó”), who achieved international fame in 1989, when rockstar Sting took him on a world tour in defense of the Amazon rainforest.

The display of diversity was a response to four years of a far-right, nationalist government that trampled over the rights of women, the LGBTQIA+ community, and indigenous peoples especially. The new government began in a context of shock, in the country and abroad, over former president Jair Bolsonaro's open support of illegal miners who invaded the lands of the Yanomami people in the Amazon, poisoned their streams with mercury, and suppressed any attempt at resistance. The federal government knew about the spread of famine and diseases among the Yanomami and openly chose not to act.

For many on the Left, seeing Lula and Raoni hold hands brought hope. First and foremost, it felt like a whiff of reconciliation, after approximately ten years of estrangement. Like other social movements, indigenous rights activists felt that the Brazilian Left had betrayed them and given its support to the old hegemonic project of occupying the Amazon through cattle rearing, mining, and building inefficient and expensive hydroelectric power plants. On the other hand, Lula's first stint as President (2003-2010) was successful in reducing Amazon deforestation, especially after worrisome data presented in 2002 revealed that deforestation had cleared over 28,000 square kilometers.

Largely due to the efforts of the Minister of Environment, activist Marina Silva, deforestation fell continuously until 2011 — three years after she left her post. The government also, in accordance with the 1988 Constitution, helped restore the rights of indigenous Brazilians over their historical lands. The military reacted grudgingly, alleging that this would undermine national sovereignty. The agribusiness sector, who had their eyes on large tracts of land in the region, in turn responded by creating a "milestone thesis," according to which only the lands indeed occupied by indigenous groups in 1988 should be recognized. The Supreme Court is yet to judge the validity of this thesis.

The same period was nonetheless a time when a series of ambitious engineering projects in the Amazon, first developed as part of a national-developmentalist ideology held by the military dictatorship in the 1970s, were put forward, so as to favor a handful of monopolistic companies and the advance of agribusiness. Among these projects, the Belo Monte dam, built between 2010 and 2016 at an estimated cost of 40 billion Brazilian reals (roughly $8 billion), is probably the most well-known and also the most deleterious. Against continuous and vocal opposition from environmentalists and indigenous activists, these projects were accelerated under Lula's successor, Dilma Rousseff (2011-2016), also from the Workers' Party. Around 2012 or 2013, the president of the Workers' Party, Gleisi Hoffman, who still occupies that post today, referred to the indigenous and environmental activists who were fighting against Belo Monte as “minorities with unrealistic ideological projects.”

Representatives of agribusiness progressively assumed key positions in Rousseff's government. This culminated in the appointment of a landowner, Senator Kátia Abreu, as Minister of Agriculture in 2015. Abreu, who owns multiple large farms in the central plains of Brazil, was by then already known to her critics as "Miss Deforestation," with Greenpeace and other NGOs awarding her a satirical golden chainsaw trophy in 2009. In 2013, during a cattle auction aimed at raising funds for the expansion of what was dubbed “private security” for farmers, meaning armed groups historically known for massacres of the local indigenous and landless peoples, she echoed the Wannsee Conference by promising to find a solution to “the indigenous question.” The episode is portrayed in detail in the film Martírio, directed by Vincent Carelli.

Unsurprisingly, soy producers interpreted Abreu’s appointment as free rein to invade Guarani-Kaiowá lands in the Center-Western state of Mato Grosso do Sul. They proceeded accordingly, engaging in their usual displays of gun violence and neglect of indigenous health tantamount to biological warfare. It is remarkable how these tactics mirror those of the colonizers from centuries past. Since the 16th century, land grabbers eliminated indigenous settlements by distributing clothes and toys infected with smallpox and other diseases.

The anti-environmental policies culminating in the construction of Belo Monte distanced much of the Left from what was still, by far, Brazil’s leading popular party. Marina Silva, who quit as Minister of the Environment in 2008, ran for president against Rousseff in 2010 and 2014. In the latter occasion, she nearly made it to the runoff election, but was held back to a large extent by a smear campaign conducted by her former party companions. She reacted by announcing her support for the right-wing candidate, Aécio Neves, in a move that might have cost her most of her political capital.

And yet, after the traumatic experience of the far Right in office, Silva and Lula were reunited. That was not all. Raoni's presence in Brasília, the capital, expressed the new government's commitment to advance indigenous leadership. The administration also created a new ministry specifically designed to advance indigenous land claims, directed by activist Sonia Guajajara. The Federal Police, for years complicit in the crimes of landowners and illegal miners, resumed their operations, destroying equipment and removing invaders, aided by the national Institute of Environment and Renewable Natural Resources (Ibama).

One might expect Lula’s administration to further reconcile with the indigenous community by abandoning big engineering projects and fighting agribusiness. They appeared to be starting these efforts in November, when President Lula attended the COP27 meeting in Egypt and declared that “Brazil is back.” He also brokered the return of German, Norwegian, British, and American investment in the Amazon Fund, which was created in 2008 under the management of the Brazilian National Development Bank (BNDES) to prevent deforestation and foster sustainable economic activities. The government's stated environmental goals involve reducing deforestation in the Amazon to zero, eliminating land conflicts, and rewriting the tax code to favor sustainable development.

This is where the picture begins to blur. The powerful landowners of the soy-exporting Central-West region have long pushed for the construction of a 580-mile long railway named “Ferrogrão,” which loosely translates to “grain rail.” It would cut through the Amazon rainforest, including protected areas like the Jamanxim National Park, slashing the cost and time of transporting the soybeans to the northern port of Belém. Another controversial project would allow for oil extraction in the “Equatorial Margin,” in deep waters near the estuary of the Amazonas river.

In March, President Lula's transportation minister, Renan Filho, expressed support for Ferrogrão, arguing that it reduces carbon emissions relative to the current use of trucks. Also in March, the president of Petrobras, Brazil’s enormous state-owned oil company, told investors that the Equatorial Margin project is a priority, though still in an early stage. The company expects $3 billion in investment. Other projects, such as a high-speed passenger rail line in the Northeast region, put to the test a passage of Lula's victory speech from October 13th of last year:

“We will show that it is possible to generate wealth without destroying nature”.

It is not entirely unsurprising that Lula's government is sending contradictory signals, trying to balance the demands of traditional, conservative pressure groups with the aspirations of social movements. There are both objective and subjective reasons for the mixed message. Firstly, it is hard to overstate the political power of agribusiness in Brazil. While the country has undergone a violent process of deindustrialization since the 1980s, agricultural and mining exports have become a financial lifeline for national accounts. As the influence of the manufacturing sector waned, that of landowners expanded. Productivity gains owed to the national research agency Embrapa’s development of a resilient soybean variant adapted to the tropics has turned vast zones of the previously untouched West into a powerhouse of soy and cattle.

Secondly, oil drilling is one of the few remaining areas where Brazil still invests in cutting-edge industrial technology. Sidelining the oil sector might prove suicidal for a government that draws much of its support from trade unions, as the fossil fuel sector is a stronghold of unionization in a deindustrializing country. The government also envisages oil production as a guarantor of energy security, until renewables become the main source of energy — most notably, biofuels and wind power in the Northeast.

Keep in mind that Lula's political profile has always been far from the radical leftist that both his conservative detractors and many of his left-wing supporters, in Brazil and abroad, tend to see. It would be kitsch, but not amiss, to describe him as a master of conciliation. As a union leader in the late 1970s, he excelled at negotiating deals between workers and employers. This shaped his politics for years to come.

At the negotiating table, Lula’s ultimate goal is always to reach a stable agreement. He has never been confrontational and is certainly not a revolutionary. While this attitude can certainly be criticized and faces the obvious limitation of objective conditions, recall that his much more confrontational successor, Dilma Rousseff, was sacked. This contrast should be read as an indication of what Lula's political ability, as one of the most important left-wing leaders alive, actually consists of. With his grasp of the stakes and possibilities of Brazilian politics, he acts as a manager of conflicts, identifying where advancement is and isn’t possible — frustrating as this might be for his grassroots diehards.

Beyond the individual figure of Lula, the ambiguity of the Workers' Party's record on indigenous rights and environmental policy offers a glimpse of the high political stakes in Brazil, a continent-sized country that houses half of the largest rainforest in the world and — at the same time — is one of the widest frontiers of agricultural expansion today. The interplay of political pressure and economic power from both sides of the dispute exposes the aporias and contradictions of 21st-century capitalism with unusual clarity.

To understand how the conflict plays out in Brazil today, look to the government. One expression of Lula's notorious ability for compromise and conciliation is his capacity to translate social conflicts into internal disputes between his ministers. This was the case between 2003 and 2010, and is now happening again. But is it possible to be a conciliatory leader in a country that derives much of its resources from predatory activities and still deliver on your promises to the environment and indigenous peoples?

That tension led to a rift which broke out in May of this year, when Ibama denied Petrobras the right to proceed with studies about the viability and safety of oil extraction from the Equatorial Margin, citing technical inconsistencies in the company's project. Petrobras' president, Jean Paul Prates, who is also a senator from the Workers' Party, regretted the loss of a “golden opportunity” to develop the Northern state of Amapá. The episode shows that, even within the government and the Left in general, many still consider fossil fuels a source of economic progress and think of environmentalism as a hurdle. Petrobras later announced it would revise its application, allegedly addressing the issues raised by Ibama.

All of this took place while Lula was attending the G7 meeting in Japan. Without mentioning the crisis among his supporters, the President structured his speech, given in Kyoto on May 19th, around the problems of oil dependency, war, and climate change. Here is the opening sentence:

“When G7 was created, in 1975, the main global crisis revolved around oil. Forty-eight years later, the world still has not managed to get rid of its dependency on fossil fuels.”

His main point was to rehash the demand presented last year at COP27: that the wealthiest countries should make good on their pledge, first expressed in 2009, to allocate $100 billion to climate action every year. To his domestic audience, in contrast, Lula tweeted allusively about "clean jobs" and "exploiting the Amazon's diversity" so that the region's 28 million people can "work and eat." The tweet was a masterpiece of ambiguity, sounding like a diplomatic dispatch in its capacity to express nothing at all.

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This was not the end of the story. On May 24th, Congress took two worrisome steps that many on the Left interpreted as capitulation, especially since the government presented little to no resistance. First, a commission approved an interim measure that, if carried out, would force changes in the structure of government, removing important agencies from the Environment, Agrarian Development and Indigenous Peoples ministries, such as the registry of rural properties, the administration of water resources, and the demarcation of indigenous lands. These agencies would be reassigned to ministries where the bureaucracy is controlled by the agribusiness sector, such as the agriculture ministry.

Later that day, the speaker of the Chamber of Deputies, Arthur Lira, passed a resolution that accelerated a vote about the milestone thesis, in such a way that NGOs, social movements and indigenous organizations would not have time to mount significant protests that have so far prevented the project from advancing. By voting on May 30th, Lira would also get ahead of the Supreme Court, who scheduled their own vote on the constitutionality of the rule for June 7th. A previous favorable decision by the House might predispose the Justices.

While these moves were a clear show of how powerful the agribusiness caucus remains, the episode as a whole elicited a swift response from civil society and Silva. The Minister made a speech warning of possible international backlash to the impending environmental destruction. She acknowledged that the country is going through a "difficult moment." Nevertheless, she promised resistance, saying that "good trees grow with stronger winds." Lula, in turn, tried to project calmness by saying — during an event at the Manufacturing Federation of São Paulo — that the political game was only just beginning. Subsequently, he summoned the ministers of the areas concerned for an emergency meeting.

It is hard to predict where these various conflicts are heading. But it is significant that the President has consistently stood by his environmental minister in both disputes. While it might be premature to declare that these episodes will result in victories for Silva, they certainly do not yet represent the defeat many on the Left are seeing.

It is worthwhile to contrast this episode to 2008, when — as Minister of the Environment — Silva lost a similar battle, which turned out to be consequential. Back then, Lula chose to side with Rousseff, the Minister of Mines and Energy at the time, by opting to proceed with the construction of the Belo Monte dam. The defeat led Silva, who was still a member of the Workers' Party, to leave for the Green Party and also resign from her post.

After 15 years, Silva’s position appears to be stronger. What’s changed? The answer may lie in the forces Silva brings with her into the government and, as a consequence, into its internal disputes. Silva's reconciliation with Lula represents a tentative alliance between the Workers’ Party and the emerging subset of “green capitalism,” backed by a powerful faction of the financial and corporate sector.

The emergence of green capitalism created a significant fault line within capital itself. While fossil fuels had become somewhat disgraced — at least until the beginning of the Russo-Ukrainian conflict —, “green” or “sustainable” capitalism has presented itself as the sole alternative to the archaic, unproductive model of extractivism and commodity export to which Brazil reverted in the last four decades.

More recently, development projects promising to boost the economy without destroying the Amazon have come to the fore. These projects hope to multiply the yields and jobs in the Northern regions of the country, which would thus become the new epicenter of economic growth, estimated to account for approximately 14% of the Brazilian gross domestic product. The prospect of new fields for investment with potentially high returns has attracted the attention of corporate and financial leaders from the more developed Southeast region of the country, particularly the two biggest cities and main financial centers, São Paulo and Rio de Janeiro. 

Brands such as Natura (cosmetics) and Raízen (biofuels) have become household names, brandishing their fame as sustainable and green. The owners of these companies, as well as bankers like Maria Alice Setúbal (Itaú bank) and the orthodox economist Eduardo Giannetti, have become Silva's main interlocutors in the last decade and helped create her party, Rede Sustentabilidade. When Lula and Silva joined forces in the presidential campaign last year, these actors were brought closer to the Workers' Party, to whom they are in principle hardly sympathetic.

For Lula, the most important gain lies in recovering part of the capitalist sector’s support, which was entirely lost after the chaotic economy of the Rousseff years. At least some of this has already taken place. In the 2018 election, big money in Brazil sided overwhelmingly with the far Right to elect Bolsonaro. In 2022, the divide was less clear-cut, with many representatives of the economic elite in São Paulo declaring their support for democracy in the abstract and occasionally for Lula explicitly.

If this is so, then the President is currently trying to accommodate not two, but three social forces. Within the capitalist setting, he has to mediate the tug of war between two forms of exploitation of the land: the nearly monocultural soy and meat complex on one hand and the technology- and capital-intensive bioeconomic project on the other. This is the local form of the global impasse of demanding to divest from fossil fuels while upholding an energy-intensive lifestyle based on growth and consumption.

It is hard to assess how much of this conflict is merely superficial, as major investors have no scruples in investing on both sides. It is also unclear to what extent we are looking at an attempt to greenwash capital as a whole. We should not forget that even the cleanest of large-scale economic activities must rely on such industries as lithium, cobalt, and rare-earth mining, or palm tree plantations, where working conditions are often degrading and the environmental record is hardly better than that of the fossil fuel industry.

Which brings us to the third actor: civil society, particularly social mobilization and environmental activism. With the aforementioned vectors of capitalism as a background, what strength do these groups have to achieve their policy goals? So far, there are signs that they are more capable of achieving their aims today than they were two decades ago.

Even during the dark times of far-right government, yearly assemblies of indigenous nations in Brasília called “Acampamento Terra Livre” (Free Land Camp) helped to attract attention to their plight and might have been able to freeze the far Right's project to limit their land rights to the territories occupied in 1988 when the Constitution was adopted (after a particularly harsh period of expulsions and persecution during the dictatorship). But this does not mean that they are strong enough to push the government toward more aggressive action in their defense. In May, the agriculture minister Carlos Fávaro, himself a soy producer and representative of agribusiness, expressed sympathy for the "milestone thesis" in an interview and suggested that the President might also have a favorable view. 

Also, the Landless Workers Movement (MST), one of the most important social movements in Brazil pushing for land reform, has established itself as a relevant producer of food products — particularly organic ones. In March, after less than three months of the new Lula government, the leader of MST, João Pedro Stédile, declared that initiatives for land reform were “too slow” and that the movement would increase pressure on Brasília to secure more incentives for family agriculture and organic crops.

A wave of mobilization, including the occupation of unproductive properties, was planned for the following months. Needless to say, the MST is the most maligned entity among the Right, as it represents the opposite kind of occupation of the territory. In May, far-right Congresspeople approved the creation of a commission to investigate the movement, with accusations that go as far as terrorism.

It is no wonder that Raoni's presence next to Lula had such an impact on public opinion and foreign commenters. Yet, politically, the gesture was as pragmatic as ever. Nevertheless, the playing field has clearly changed, apparently in favor of the environment, even if one is justified in suspecting high levels of greenwashing.

If we recognize that the climate crisis runs as two parallel conflicts — one between two brands of capitalism and, the other, against capital itself — it is remarkable that Lula is once again internalizing both struggles in the structures of his government. While the fundamental ambiguity at the core of his politics remains untouched, it is permeable to outside pressure (ie, social struggle), the ultimate source of political change.

Diego Viana is a Brazilian economic journalist. He earned his PhD in political philosophy from the University of São Paulo and covers Brazilian politics, economy, and social conflict.