THE NEED TO ABANDON NEOLIBERALISM IN BRAZIL IS URGENT TO PROMOTE ITS DEVELOPMENT
Fernando A.G. Alcoforado
PhD em Planejamento Territorial e Desenvolvimento Regional
Fernando Alcoforado*
The aim of this article is to demonstrate the urgent need to abandon the neoliberal economic model implemented in 1990 in Brazil because its failure is evidenced by the poor results obtained in the economic and social plans and to replace it with the national developmentalist model along the Keynesian lines in which the State would assume the role of inducing economic and social development. The neoliberal economic model was adopted globally as a political project launched by the capitalist class when the world capitalist system showed a decline in the profitability of capital and felt very threatened, politically and economically, in the late 1960s and 1970s, by the advance of socialism in the world. The neoliberal economic model adopted in Brazil contributed to causing true devastation in the Brazilian economy since its implementation in 1990 configured in: 1) poor economic growth; 2) a drop in investment rates in the Brazilian economy; 3) the deindustrialization of the Brazilian economy; 4) the worsening of Brazil's social problems with the increase in income concentration, unemployment, and extreme poverty; and, 5) the incapacity of the Brazilian State to solve economic and social problems.
The neoliberal economic model implemented in 1990 is largely responsible for the extremely low economic growth achieved by Brazil from 1990 to the present. Figure 1 makes it quite clear that the adoption of the neoliberal economic model implemented in 1990 resulted in a drop in GDP (Gross Domestic Product) growth compared to the growth rates achieved from 1930 to 1980 during the governments of Getúlio Vargas, Juscelino Kubitschek and the military governments after 1964, when Brazil adopted the national developmentalist model and presented decennial GDP growth rates between 4.4% and 8.6%. Brazil presented very low decadal GDP growth rates of less than 3.7% from 1991 to 2020, as shown in Figure 1, 1.17% as an average in the decade 2013/2023 and 4.53% as an average GDP growth rate from 2020 to 2023, based on the data in Figure 2.
Figure 1 - Decadal GDP growth rates in Brazil (%)
Figure 2- Evolution of Brazil's GDP from 2011 to 2023
The neoliberal economic model implemented in 1990 is largely responsible for the drop in investment rates in the Brazilian economy. Figure 3 makes it quite clear that the adoption of the neoliberal economic model implemented in 1990 resulted in a drop in investment rates in the Brazilian economy, contrary to the speeches of the defenders of neoliberalism who claimed that the opening of the Brazilian economy would attract foreign investors, which did not happen. With the adoption of the neoliberal economic model from 1989 to 2019, there was a drop in the rate of public and private investment in the Brazilian economy, which fell from 27% of GDP in 1989 to 16,4% of GDP in 2019, as shown in Figure 3. This fact explains the drop in GDP growth in the same period, expressed in Figure 1, and Brazil's economic stagnation and, consequently, the steep rise in unemployment, the drop in household consumption and the widespread bankruptcy of companies in the country.
Figure 3 - Investment rate in Brazil (%GDP)
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Figure 3 highlights the contrast between investment rates from 1989 to 2020 and investment rates between 1930 and 1989, when the national developmentalist economic model was adopted along the Keynesian lines, which defended the State as an active agent as an inducer of economic and social development, and there were large investments by the federal government in the expansion of economic infrastructure (energy, transport and communications) and social infrastructure (education, health, housing and basic sanitation) and private national investments , state investments and foreign investments in the expansion of industry, commerce and services. These investments contributed to the high growth of Brazil's GDP from 1930 to 1980, as shown in Figure 1.?
The neoliberal economic model implemented in 1990 is largely responsible for the deindustrialization of Brazil in the period 1989/2019, as shown in Figure 4. The analysis of Figure 4 highlights the decline in the industry's share of Brazil's GDP from 1987 to 2019, which fell from 27.3% in 1987 to 11% in 2019, unlike what occurred in the period 1947/1987, when the national developmentalist model was adopted, and its share in Brazil's GDP increased from 16.5% in 1947 to 27.3% in 1987. This means that the neoliberal economic model contributed to Brazil's deindustrialization. Deindustrialization occurred in Brazil due to the opening of the Brazilian economy, which caused the national industry to be dismantled due to competition with imported products.
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Figure 4 - Industry's share in Brazil's GDP (%GDP)
The neoliberal economic model implemented in 1990 is largely responsible for worsening Brazil's social problems with the increase in income concentration, unemployment, and extreme poverty. Brazil has the 2nd highest income concentration in the world, according to the United Nations (UN) Human Development Report (HDR) published in December 2019. Brazil is behind only Qatar when analyzing the richest 1%. In Brazil, the richest 1% concentrates 28.3% of the country's total income (in Qatar this proportion is 29%). In other words, in Brazil almost a third of the income is in the hands of the richest. The richest 10% in Brazil concentrate 41.9% of the total income. Brazil is the country with the highest income concentration when compared to the countries in the BRICS group of developing countries (Brazil, Russia, India, China and South Africa). India appears in the ranking with 21.3% of its total income in the hands of the richest 1%. Russia has 20.2% and South Africa leaves 19.2% of its total income with the richest 1%. Meanwhile, China is the BRICS country with the lowest concentration in this sense, with 13.9%.
Comparative research led by Thomas Piketty, author of Capital in the Twenty-First Century published in 2014, indicates that 27.8% of the national wealth is in the hands of a few in Brazil. Almost 30% of Brazil's income is in the hands of just 1% of the country's inhabitants, the highest concentration of its kind in the world. This is according to the 2018 Global Inequality Survey, coordinated, among others, by French economist Thomas Piketty. The group, made up of hundreds of scholars, provides a database that allows comparisons of the evolution of income inequality in the world in recent years. The World Wealth & Income Database indicates that the richest 1% in Brazil held 27.8% of the country's income in 2015.
According to the data collected by Piketty's group, Brazilian millionaires were ahead of millionaires in the Middle East, who hold 26.3% of the region's income. Brazil also stands out in the richest 10%, but not as strongly as seen in the comparison of the richest 1%. The data show that the Middle East has 61% of income in the hands of its richest 10%, followed by Brazil and India, both with 55%, and Sub-Saharan Africa, with 54%. The region in which the richest 10% hold the smallest share of wealth is Europe, with 37%.
In addition to presenting the worst indicators of social inequality in the world, the unemployment rate, according to the IBGE, of 6.9% in Brazil is quite high (7.5 million unemployed in the 2nd quarter of 2024). Extreme poverty in Brazil totals 9.6 million people. The group of people living in extreme poverty in Brazil survives on R$ 145 (US$ 33.02) per month. The number of people living in extreme poverty has been growing since 2015, reversing the downward trend in poverty seen in previous years. Poverty mainly affects states in the North and Northeast of Brazil, especially the black and brown population, with no education or with incomplete basic education.
The neoliberal economic model implemented in 1990 is largely responsible for incapacitating the Brazilian State in solving Brazil's economic and social problems by hindering its role as an inducer of economic and social development with the adoption of the privatization policy, the public spending cap policy since the Michel Temer government, and the autonomy of the Central Bank since the Jair Bolsonaro government as part of the strategy of globalized neoliberal capitalism to transform it into a minimal state. It should be noted that the minimal state is the name given to the neoliberal capitalist idea that the role of the state within society should be as small as possible, exercising only those activities considered “essential” and of the highest order. Neoliberal capitalist theorists also advocate minimal tax collection and the privatization of public services.
In order to incapacitate the Brazilian State in solving Brazil's economic and social problems and to make the minimal State viable, the neoliberal doctrine advocates the least possible participation of the State in the economy by adopting the policy of privatization of state-owned companies such as that which occurred in Brazil with the privatization of Usiminas, Celma and Cosinor by the Collor government, of Embraer and Companhia Siderúrgica Nacional (CSN) by the Itamar Franco government, of Vale, Telebras, Embratel, Banespa and Banco Meridional by the Fernando Henrique Cardoso government, of federal highways (such as BR 101), Santo Ant?nio Hydroelectric Plant and Jirau Hydroelectric Plant, highways (such as the Rio-Niterói Bridge and BR 050) and airports (such as those in Guarulhos and Brasília) by the Dilma Rousseff government, of Eletroacre and Ceron by the Michel Temer government and Eletrobras and Companhia Docas do Espírito Santo (Codesa), BR Distribuidora and Liquigás by the Jair Bolsonaro government.
In order to incapacitate the Brazilian State in solving Brazil's economic and social problems, the public spending cap policy adopted during the Michel Temer government was adopted, which limited the Brazilian state's ability to promote public investment due to the financial asphyxiation to which it was subjected and made it impossible for it to adopt economic, fiscal and monetary policies, coordinated with each other with the autonomy of the Central Bank adopted during the Jair Bolsonaro government. Due to these factors, the Lula government inherited a Brazilian state incapable of promoting economic and social development because, with the public spending cap, the Brazilian government will not be able to increase the federal budget and the existence of a Central Bank that adopts monetary policies disconnected from the government's economic policy, making it impossible to resume Brazil's development.
In an attempt to alleviate the burden of the cursed legacy of the public spending cap policy adopted during the Temer and Bolsonaro governments, the Lula government instituted the so-called fiscal framework, which can also be called the “new public spending cap” now conditioned on the increase in public tax collection. With the fiscal framework, the Lula government will be able to increase public spending as long as there is an increase in tax collection to balance the government's accounts. This is a huge challenge since the increase in public revenue depends on the expansion of the economy, which in turn depends on the increase in public and private investments. In other words, if there is a drop in public revenue, the Lula government will not be able to make the public investments necessary for Brazil's development and will be forced to make cuts to the federal budget, such as the recent decision to freeze R$15 billion in the 2024 budget. The fact is that the Lula government's fiscal framework still keeps it hostage to the neoliberal economic model.
One fact is clear: to promote the resumption of Brazil's economic growth, increase its investment rates, halt the process of deindustrialization of the Brazilian economy and solve the country's social problems, it is necessary to abandon the neoliberal economic model and replace it with the national developmentalist model along the Keynesian lines with the Brazilian State acting as a planner and inducer of national development. It is worth noting that John Maynard Keynes defended the State as an active agent inducing economic development and against recession and high unemployment. By demanding a larger government as a decision-maker in a country's economy, Keynes believed that capitalism could overcome its structural problems as an economic system as long as significant reforms were made, as he proposed, given that liberal capitalism, which dominated the world economy until 1945, had proven incompatible with maintaining full employment and economic stability. This is also evident in today's neoliberal capitalism.
For the Brazilian State to recover its capacity to act as an inducer of development in Brazil, it is urgent to ensure that the country's progressive forces gain a majority in the National Congress, in addition to the Presidency of the Republic, to neutralize the retrograde political forces that defend neoliberalism and put an end to the policy of privatization of state-owned companies, the policy of capping public spending and the autonomy of the Central Bank. To do so, it would be necessary for the progressive forces to initially win the majority of city halls and municipal chambers in the 2024 municipal elections. Unfortunately, this is not what happened. Given this fact, the only thing left for the progressive forces to do is persevere in building a solid alliance with political forces from the democratic center and mobilize organized civil society to elect a progressive president of the Republic in 2026, the majority of state governors and the parliamentary majority in the National Congress of candidates who are committed to political, economic and social advances in Brazil. These are the conditions for the Brazilian State to abandon neoliberalism and promote the development of Brazil for the benefit of the vast majority of the Brazilian population and not just the holders of Brazilian and international capital.
* Fernando Alcoforado, awarded the medal of Engineering Merit of the CONFEA / CREA System, member of the SBPC- Brazilian Society for the Progress of Science, IPB- Polytechnic Institute of Bahia and of the Bahia Academy of Education, engineer from the UFBA Polytechnic School and doctor in Territorial Planning and Regional Development from the University of Barcelona, college professor (Engineering, Economy and Administration) and consultant in the areas of strategic planning, business planning, regional planning, urban planning and energy systems, was Advisor to the Vice President of Engineering and Technology at LIGHT S.A. Electric power distribution company from Rio de Janeiro, Strategic Planning Coordinator of CEPED- Bahia Research and Development Center, Undersecretary of Energy of the State of Bahia, Secretary of Planning of Salvador, is the author of the books Globaliza??o (Editora Nobel, S?o Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, S?o Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, S?o Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,https://www.tesisenred.net/handle/10803/1944 , 2003), Globaliza??o e Desenvolvimento (Editora Nobel, S?o Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporanea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, S?o Paulo, 2010), Amaz?nia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, S?o Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econ?mico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudan?a Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revolu??es Científicas, Econ?micas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Inven??o de um novo Brasil (Editora CRV, Curitiba, 2017),? Esquerda x Direita e a sua convergência (Associa??o Baiana de Imprensa, Salvador, 2018), Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019), A humanidade amea?ada e as estratégias para sua sobrevivência (Editora Dialética, S?o Paulo, 2021), A escalada da ciência e da tecnologia e sua contribui??o ao progresso e à sobrevivência da humanidade (Editora CRV, Curitiba, 2022), a chapter in the book Flood Handbook (CRC Press,? Boca Raton, Florida United States, 2022), How to protect human beings from threats to their existence and avoid the extinction of humanity (Generis Publishing, Europe, Republic of Moldova, Chi?in?u, 2023), A revolu??o da educa??o necessária ao Brasil na era contemporanea (Editora CRV, Curitiba, 2023), Como construir um mundo de paz, progresso e felicidade para toda a humanidade (Editora CRV, Curitiba, 2024) and How to build a world of peace, progress and happiness for all humanity (Editora CRV, Curitiba, 2024).