Thursday, April 21, 2016

Matias Vernengo — Some thoughts on the impeachment and the right wing turn in Brazil

Details. Here are some of the highlights.
On the strength of the social record of her policies, Dilma won a narrow reelection in 2014, with the promise to expand social spending, to promote economic growth and to stand against banks' greediness, reducing interest rates. After the reelection, however, the government did a 180-degree turn, appointed a Finance Minister, Joaquim Levy, who came from one of the largest banks in the country, and adopted austerity policies, fiscal adjustment and higher interest rates to control inflation. Growth, not surprisingly, collapsed with a decline of GDP of about 3.8% in 2015.…
Interestingly enough, while Aécio Neves, the PSDB candidate that lost the last election in 2014, has been named in the corruption scandal, president Rousseff seems to be completely untainted by accusations of corruption. More importantly, the central issues related to corruption are the structural ones. That is the elements that make corruption a necessary feature to manage the country, like the need to buy votes in congress to pass legislation, something that has made the Brazilian Democratic Movement Party (PMDB in Portuguese) an essential element for governability. In fact, PMDB is at the center of all corruption scandals and the beneficiaries of the impeachment, including the Vice-President [who stands to become president], are members of that party.…
Clearly, the impeachment of Dilma Rousseff is not about corruption, and the actual process hinges on the delay in the payments to public banks (the so-called 'pedaladas'), which in the view of some imply the government is borrowing from public banks, which is against the Law of Fiscal Responsibility, but not on the corruption scandal per se. Note that this fiscal accounting devices were a common practice, even in previous governments, were never questioned, and can hardly be considered a crime that requires the impeachment of the president. Further, although her government is highly unpopular, since even left of center groups have been protesting, and more so since she embraced the austerity policies after reelection, it is not true that the impeachment was popular. Public manifestations against the impeachment have been as large, if not larger, than pro-impeachment protests, and the country remains essentially evenly divided, as it was during the 2014 election. In that sense, the impeachment is certainly not about the preservation of democratic institutions.
Socioeconomically speaking the poorer and the afro-descendants tend to be against impeachment, and that was reflected in the votes in Congress, to a great extent because these groups were the main beneficiaries of PT’s social policies, and real wage increases. On the other hand, the middle class and the business groups, as represented by Federation of Industries of the State of São Paulo (FIESP in Portuguese), have been decidedly in favor. There is a clear class, and that in Brazil means race too, component to the impeachment process. So there are good reasons to believe that the impeachment represents a modern type of coup, based on the utilization of media for the mobilization of public opinion, and for bringing down a government, that, even if moderately, has reduced inequality in one of the most unequal countries in the world. The impeachment is about social class and inequality, and the possibility of a left of center project.

Naked Keynesianism
Some thoughts on the impeachment and the right wing turn in Brazil
Matias Vernengo | Associate Professor of Economics, Bucknell University

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