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Here’s how it works: The left-of-centre policies of higher social and
environmental protection the electorate wants and which Lula promises will certainly cost business more, thus threatening to make Brazil a relatively unattractive place for global investors. That’s why over the past weeks investors have been pulling funds out of Brazil, eventually forcing it to submit to the tender mercies of the IMF. Under the heading "Situation Critical", on June 24th the Financial Times reported that: "On Friday, the Real plunged to an all-time low against the dollar before recovering slightly in afternoon trading. Spreads on the country's sovereign bonds have widened alarmingly. The country's stock market, Latin America's biggest, has fallen to its lowest level this year. International investors, it seems, are bailing out in droves. ... Just weeks ago, international policy-makers were singing Brazil's praises for exhibiting few, if any, signs of contagion from Argentina, its deeply troubled neighbour. .... At the root of market concerns is Luiz Inacio da Silva, better known as Lula,... Since early May, Lula's opinion poll lead over Jose Serra, the ruling Social Democratic party (PSDB) candidate, has increased significantly, raising the possibility that the former metalworker will become Brazil's next president." Even weeks before the presidential election, therefore, the markets were already in the process of delivering their "casting vote" on who is to run Brazil.
Despite the markets’ harsh warnings, the people of Brazil continue to resolutely support Lula even though the crisis has forced Brazil to ask for IMF assistance, the conditions of which have led to all four main candidates having their hands comprehensively tied in advance. In bondage to the IMF, all must now follow severe austerity programmes, cuts in public services and, of course, yet more privatisation. As the Financial Times (Oct 2, 2002) explains: "To secure its $30bn funding package from the IMF, Brazil agreed to increase the size of it primary budget surplus…to 3.75% of gross domestic product. All four main candidates have agreed to maintain this policy into next year."
So under these circumstances, what significant shift can Lula’s millions of supporters expect from their next President? Economic histrorian, Eduardo Gianetti, answers by conceding that, "My fear is that they [Lula’s PT] will inherit a situation that is so critical they won't have a chance o show how different they are". Exactly! And this is why the aspirations of millions of Brazilians are doomed to be disappointed. Lula, shortly to be "in power" and yet utterly powerless to buck market and corporate demands (as well as IMF conditionality), will doubtless end up trying to fool and placate a disappointed electorate through the kind of limp, ‘Third Way’ spin which citizens in Britain and other countries have come to expect from the world’s ‘New Labour’ parties.
But it would be wrong to imply that "the markets" or global investors
represent some sinister ‘evil conspiracy’ bent on subverting democracy for their own benefit. For lets be clear that investment managers cannot afford to lose out by accepting lower returns in Brazil when they could be earning greater ones elsewhere. After all, what capital owner would choose to deposit funds with an investment company not at the top of the profits-delivery league? So, we are not talking here about a conspiracy, but merely about the forces of destructive competition engendered by today’s global free movement of capital; forces which affect society from top to bottom, which are beyond democratic accountability and which no nation alone can buck.
This, of course, is not democracy, but pseudo-democracy; a kind of global market dictatorship which demands business and market-friendly policies regardless of the party in power. It is, in a very real sense, a destructively competitive vicious circle over which no nation, institution nor investor has any effective control. Even if all the G7 nations attempted to re-regulate global markets, capital and corporations would necessarily flee to the many non-G7 financial centres in a bid to safeguard their profits, their share price and their jobs. And do so they must. For not to do so would be to lose out to other investors or corporations that do. Furthermore, the IMF to whom the world looks to solve such problems is also relatively powerless, having itself become enslaved to the myopic ‘Washington Consensus’ mind-set which takes the global free movement of capital as its unquestioned starting point; a mind-set which therefore assumes competition to be exclusively beneficial while ignoring that it can be either constructive or destructive. For ignoring competition’s destructive side, they are destined to exacerbate the world’s economic problems while actually thinking they are solving them.
Brazil, like just about all other countries, can therefore kiss genuine
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Comments
Jarra McGrath | Oct 13th, 2002
wow thanks cameron! a very interesting article! thanks for the understanding :D
Democracy clarita zarate | Nov 3rd, 2004
Great article! Read, "Bush, The Election, and Terrorism". I think you'll relate. CZ
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