Though Brazil's new centrist president, Fernando Henrique Cardoso, achieved early prominence as a Marxist sociologist, there have been no major breaks in his intellectual career. He has simply embraced the position of his former object of study, the Brazilian business class. In January, 1993, almost two years before Mexico's economic drift became every financial risk ana- lyst's worst nightmare, Washington's prestigious Institute for International Economics (IIE) brought together more than 100 specialists from the United States and a number of Asian, African and Latin American countries to discuss a document by one of the Institute's senior fellows, John Williamson, "In Search of a Manual for Technopols." The discussion took place in the context of an international seminar on "The Political Economy of Policy Reform." The two-day gathering brought together executives from governments, the multilateral banks, and private businesses as well as a select handful of academics. Discussions of economic stabilization and reform pro- grams turned on the need for "the most favorable con- ditions and action-guidelines enabling 'technopols' to garner the political support needed to make such pro- grams work," the delicate terms implicit in what Williamson years ago termed the "Washington Con- sensus." This illustrative figure of speech, today in common use internationally, refers to a single adjustment plan for the world's peripheral economies, formulated by International Monetary Fund (IMF) and World Bank strategists. So far, the plan has been implemented in 60-plus nations. The plan seeks to attain uniformity in national economic policies, sometimes by placing those policies under the direct management of IMF VOL XXVIII, No 6 MAY/JUNE 1995 and World Bank technical staff. This has happened in many African nations, beginning with Somalia in the early 1980s. Elsewhere, in countries like Bolivia, Poland and even Russia, the strategy has been broad- ened to include participation by leading economists, mostly from U.S. universities. A third option applies to nations with more fully developed bureaucratic structures. These countries employ politically astute, native-born economists, Williamson's "technopols," who are not only capable of ensuring proper administration of their free-market policies, but also able to garner popular support for the same consensus agenda. These have included Mexico's Pedro Aspe, Carlos Salinas and Ernesto Zedillo; Argentina's Domingo Cavallo; Russia's Yegor Gaidar; Taiwan's Lee Teng-hui; India's Man- mohan Singh; and even Turkey's Turgut Ozal. There has also been a long line of Brazilian technopols, beginning with Zl61ia Cardoso and Ant6nio Kandir, followed by Pedro Malan, Persio Arida, Edmar Bacha, and Gustavo Franco. The foundation of this "New Colonialism," as Newsweek termed it in its August 1, 1994 issue, is a three-step strategic plan. First, national macroeco- nomic stabilization must be assured, with absolute priority given to producing a fiscal surplus. Invari- ably, this implies reorganizing inter-governmental fis- cal relationships, and restructuring government social-welfare mechanisms. The plan's second phase stresses what in World Bank parlance are termed "structural reforms," encompassing financial and commercial reforms, deregulation of markets, and the privatization of state-run enterprises. The third stage 17 Jose Luiz Fiori is a professor of political science at the University of the State of Sa5 Paulo and the Federal University of Rio de Janeiro. He thanks journalist Luiz Cesar Faro for his collabora- tion. Translated from the Portuguese by Charles H. Roberts.REPORT ON BRAZIL is supposed to bring renewed investment and eco- nomic growth. By the early 1990s, a host of pessimistic policy evaluations by both the IMF and the World Bank sin- gled out the crucial importance of the "political fac- tor" in the success or failure of programs. This new concern on the part of intellectuals and managers of the Washington Con- sensus explains not only the timeliness of the Williamson semi- nar, hailed as a bench- mark in the treatment of the issue, but also the participation of two prominent U.S. politi- cal scientists, Joan Nelson and Stephan Haggard, the authors of the most complete comparative studies in the United States on the implementation of such adjustment pro- grams. In his introductory document, Williamson clearly acknowledges the perverse economic A family of and social conse- quences of austerity and liberalization policies on tar- get nations' economies and populations, as well as the logic that makes it difficult to elect a minimally stable government. Working from these premises, Williamson suggests several political tactics and arti- fices capable of making the electorate accept the social devastation invariably wrought by the neoliberal pro- gram as both temporarily necessary, and undertaken for the greater long-term good. The programs are deemed more likely to succeed when their implemen- tation follows some catastrophe-such as war or hyperinflation--of a magnitude capable of undermin- ing any and all resistance; when technopols are pitted against a discredited or disorganized opposition; and where, in addition, strong leaders can "insulate" the programs from social issues. In all of the cases it has been necessary to form a political coalition strong enough to take power at the most favorable moment, and to wield it over long peri- ods at the head of governments with solid parliamen- tary majorities. Indeed, such legislative majorities are now considered essential to the "credibility" required by the risk analysts at the handful of giant financial consulting firms which in effect control global move- ments of capital. ernando Henrique Cardoso, Brazil's recently elected president, came to power with the back- ing of a neoliberal elite determined to enforce precisely this hegemonic stabilization program. Mid- way through his campaign for the presidency, Car- doso, then finance minister, launched a tight-money anti-inflation program called the Real Plan, named rural workers in the northern state of Para. after the new currency. The Plan brought inflation under control for the first time in years, and gave Car- doso the momentum he needed to capture the presi- dency. Considering the umbilical linkage between the Real Plan's stated long-term strategic objectives- obligatory reforms to a gamut of fiscal and monetary policies, liberalized commercial and financial regula- tions, privatization of state-run concerns, and renewed economic growth-and the implied corollary require- ment of long-term political stability, the Plan appears to most observers to be simply another offspring of the larger family of stabilization packages discussed at IIE's Washington seminar. Though Cardoso achieved prominence as a Marxist sociologist in the 1960s and 1970s, it can be argued- even though his early works contain a vehement, well- reasoned indictment of the course he has come to take as president-that the trajectory of his intellectual career contains no major breaks. His early scholarship includes some of the seminal work on dependency theory, written from the mid-1960s to the early 1970s, when he was exiled in Chile, and associated with the UN's Economic Commission on Latin America (ECLA). One can trace the logical path that led him from his theoretical contributions on the nature of 18NACIA REPORT ON THE AMERICAS NACIA REPORT ON THE AMERICAS 18REPORT ON BRAZIL Globalization is the result of political decisions made, in an increasingly focused manner, by a small number of transnational companies and banks and a few national governments. Brazilian industrialists, and the fundamentally depen- dent nature of Brazilian capitalism, to his current posi- tion in political and ideological struggle. Cardoso's academic work can be summarized as a tireless search for the connections between the inter- ests and objectives which exist under given "historico- structural" situations, and the political strategies that are constructed by social groups and their political coalitions. With this aim, Cardoso was one of the first to examine and conclude forcefully, as early as 1963, that Brazil's national industrial bourgeoisie could not play the role that the country's nationalist-populist ideology called upon it to play. He argued that the industrial bourgeoisie had abdicated any pretensions to exercising full hegemony over society, accepting its role as junior partner to Western capitalism. This find- ing enabled Cardoso to discover very early on that while the Brazilian bourgeoisie may be associated, depending on the circumstances, with a broad range of ideological positions, in the end it always supported enhanced capital mobility, and the geopolitical and economic developments which led to the increasing internationalization of capital. This discovery was directly responsible for Car- doso's next and most original step. For Cardoso, peripheral capitalism was defined by the lack of con- vertible currencies and the lack of endogenous capa- bility for technological innovation. "Dependent sta- tus," on the other hand, was defined by the specific way in which national entrepreneurs were associated with international capital and with the state. This three-way relationship among national and interna- tional capital and the state cushioned the "internation- alization of the domestic market." By the 1970s, multinational corporations had taken the lead in almost all sectors featuring state-of-the-art technolo- gies, coming to account for approximately 40% of Brazil's industrial output. It would hardly be a stretch to extend and properly update Cardoso's analysis to fit the current "structural situation," defined by a more advanced international- ization of capitalism, associated with an increase in Brazil's internal "sensitivity" to changes in the world economy. Indeed, the new economic conjuncture goes beyond-though does not invalidate-the essence of Cardoso's writings of the 1960s and 1970s. In a recent article called "Reform and Imagination" which VOL XXVIII, NO 6 MAY/JUNE 1995 appeared in the daily Folha de Sdo Paulo on July 10, 1994, Cardoso exuberantly displays his historical- materialist sensibilities when he states that he contin- ues "to believe that globalization of the economy is a direct consequence of a new mode-flowing from a new technology--of production." His concrete grasp of the facts, however, surprisingly ignores any politi- cal and power dimension in the globalization process. He calls any conceptual resistance to the dominant model "devoid of any practical application." He decries charges that he has a political connection with the so-called "new colonialism" as "conspiratorial stereotypes." He recognizes that he places conditions on his ability to govern by adopting a policy of uni- form stabilization, reforming the state, and attempting to attain a "social democracy capable of reducing the inequalities of a mass society." Finally, he refuses to admit his obvious swing to the right, seeking to explain away, in particular, the most hardcore mem- bers of his coalition, the Liberal Front Party (PFL), principal heir to the spoils of the successive military governments. In his view, the PFL has freed itself from its past, and no longer represents traditional clientelism. The key issue is that, contrary to what Cardoso thinks, globalization of the economy is not just a con- sequence of technological development or the competi- tive evolution of markets. Globalization is increasingly proving to be a political, cultural and economic reality whose origins and consequences are more complex because of its many non-economic dimensions. While globalization emerged behind the backs of many pro- ducers and governments, it is also the result of political and economic decisions made, in an increasingly focused manner, by a relatively small number of global oligopolies and banks and a few national governments. It appears, however, that neoliberals, for obvious rea- sons, as well as some of the old structuralists and trau- matized leftists, have tremendous difficulty assimilat- ing the importance of the political factor in the origin and unfinished history of this process of change that capitalism is undergoing. In many ways, therefore, Cardoso is right when he says that at no point has he renounced or cast aside his sociological analysis. What he has done is perhaps more profound. He has chosen a new ethical and polit- ical option by abandoning his reformist idealism to 19REPORT ON BRAZIL From the standpoint of his personal political strategy, Cardoso has proven to be an applied and rigorous disciple of the Spanish social democrat, Felipe Gonzalez. embrace the position of his former object of study, the Brazilian business class. Simultaneously, he assumes as an unquestionable fact the current international relations of power and dependency. After two decades of critical political life, Cardoso is offering himself as the "condottiere of the industrial bourgeoisie," capa- ble of redirecting it to its manifest destiny as the less- er, dependent partner of Western capitalism, with new life breathed into it by the third technological revolu- tion and by financial globalization. His painful letting go of his old idealist and reformist positions, expressed in his frequent discom- fort with the foibles of neoliberalism and his irritation whenever the issue is raised, may be less a move to the right than a hitherto unimaginable naivete. This naivete, in turn, is the result of an even more unimag- inable mistaken assessment of the process and pro- grammatic content of the Spanish social democracy of Felipe Gonzalez, which was always the great model that has guided Cardoso's political history. Cardoso may believe that the "infallible combination" of his capacity for political wizardry and the materialist forces of historical inevitability make it possible to avoid having to first reach par with Mexico or Argentina before attaining the level of Spain. To ana- lyze Cardoso's future, it is therefore important to be familiar with the history of Spain's "real social democracy." A close look at that history indicates that Cardoso is mistaken in his idealized vision of what Spain was and still is. quences, the "real social-liberalism" achieved by Spain's "socialist" government after 12 years of pactacidn social is indistinguishable from the neoliberalism of Great Britain under Margaret Thatcher. The Spanish "economic miracle" is summa- rized, in chronological terms, in eight years of reces- sion (1977-85) and four years of growth (1986-1990) with a common objective: reducing inflation and pro- moting economic growth. The issue of renewed growth, however, was left almost entirely to the vagaries of the marketplace. From 1982 to 1986, the dominant orthodoxy suggested devaluation of the exchange rate, high interest rates, clamps on wages, and fiscal and monetary austerity. These policies were implemented so rigorously that the recession dragged on until 1985, when inflation slowly receded into the single digits. The entry of Spain into the European Economic Community (EEC) in 1986 reoriented Gonzalez' polit- ical-economic strategy towards the new global ortho- doxy: economic liberalization and deregulation, which provoked an overvaluation of the exchange rate. This was responsible for Spain's mounting trade deficit, financed by the import of short- and long-term capital, which was attracted by extremely high interest rates in relation to the average in the EEC. This situation of external disequilibrium was fur- ther aggravated with the entry of Spain into the European Monetary System (EMS) in 1989, which was the Spanish equivalent of adopting dollar- ization in Brazil. In addition to working towards the goal of stanching inflation, the govern- ment under Gonzilez embraced new orthodox policies: structur- al reforms of the labor market and social security, together with deregulation, liberaliza- tion, and reduction in the size of the public sector. What were the lessons of the rapid economic growth Spain experienced from 1986 to 1990? First, this growth was above all an effect of entering the EEC and the consequent explosion in external- mostly speculative-investment. From 1986 to 1990, 10 billion pesetas flowed into Spain, ten times more than in the previous five-year period. Of this sum, 30% was used to buy local firms; 58% for invest- ments in portfolios of stocks, bonds, and public debt on the securities markets; and the rest was earmarked mainly for the purchase of real estate. This process brought about an appreciation of real and financial assets, increased the personal wealth of their owners, and multiplied urban housing costs, but did little in the way of contributing to activities capable of gener- ating lasting and stable economic progress. In that period, Spain spent less on human resources-about 0.08% of GDP-than any other country of Europe, except Luxembourg; and its investment in research and development was no more than 0.68% of GDP, superior only to Portugal. 20 NACIA REPORT ON THE AMERICAS NACLA REPORT ON THE AMERICAS 20REPORT ON BRAZIL The figures show that Spain ceased being an indus- valued currency, was unable trial economy. During this period, and increasingly in ness. the 1980s and 1990s, industry's share of GDP in Now if that was the econo Spain fell from 32.9% to 24.2%, employing just 27% liberalism," what can be sai of the labor force, while the participation of services Here too the facts are eloque increased from 47% to 63% of GDP, today employ- Felipe GonzAlez, social sp ing about 60% of the population. What industry 19.42% to 21.37% of GDP, remains is divided between small and medium enter- keeps Spain among the lox Left: The bookjacket of Cardoso's seminal contribution to Latin American dependency theory. Above: Cardoso speaks to journalists in September, 1985, during his campaign for mayor of Sio Paulo. prises, which account for about 90% of industrial out- put, and a dynamic core of multinationals, which accounts for the lion's share of exports. According to data published by The Economist in October, 1994, Spain, of all the countries belonging to the Organiza- tion of Economic Cooperation and Development (OECD), sold the largest number of firms to foreign- ers between 1989 and 1993, because as the economy opened up, Spanish capital migrated to the service sector. According to the World Economic Forum, Spain is now among the least competitive nations of the OECD. This scheme that has provoked the deindustrializa- tion of Spain, without attaining greater competitive- ness, is an essential part of the strategy adopted by the GonzAlez government. It is also automatically accepted as part of the logic of Cardoso's plan. Spain has been a pioneer for more than a decade, of this "orthodox swindle." The tucanos brasileiros-Brazil- ian social democrats-should learn from the experi- ence of Spanish social-liberalism that inflation never decreases to levels capable of halting deindustrializa- tion and denationalization. The Spanish economy, hindered as it was by high interest rates and an over- to achieve competitive- mic result of "real social d about its social facet? nt. In 12 years of rule by ending increased from a minimal increase that lest ranks of the OECD countries. As for income distribution, the poorest 10% of all fam- ilies increased their share from 2.41% in 1980 to 2.85% in 1992, and the highest 10% of all incomes saw their share decline in the same period from 29.23% to 28.01%. Nevertheless, the wage share of GDP fell from 51.2% in 1980 to 46.1% in 1991, while unemployment, about 6% at the outset of the GonzAlez Administra- tion, has skyrocketed to 24% of the adult labor force today, reaching the imponderable level of 37 9% among peo- ple under 25 years of age. Of the population between the ages of 30 and 55, 800,000 of the 3.4 million unemployed are illiterate or have little if any training, which makes it very difficult for them to hold jobs offered in the "restructured" sector of the economy. To round out the social picture of the "Spanish mira- cle," one should recall that beginning in 1992, the Economic Plan for Convergence, which was designed to complement the Maastrich agreements, brought to the forefront of Spanish political debate the "de-uni- versalization" of social security. This new situation led a high-ranking member of GonzAlez' party to note recently that "Spain has begun to turn back without ever having gone forward." his journey through the history of "real social liberalism" in Spain demonstrates that the cur- rent hegemonic model has a long history and has been clothed in a variety of garbs. It also suggests that from the standpoint of his personal political strategy, Cardoso has proven to be an applied and rigorous dis- ciple of Gonzilez. He got ahead of himself on just one point: from the outset, notwithstanding his sleight of hand, he has been allied with the right. This alliance 21 4 C z x 21 VOL XXVIII, NO 6 MAY/JUNE 1995REPORT ON BRAZIL led Ant6nio Carlos Magalhies-the conservative PFL leader who is one of the pillars of Cardoso's coali- tion-to remark with sarcastic pleasure to the presi- dent's chorus of Penelopes, that they are weeping over someone who never existed. "Behind the brilliant Marxist sociologist," suggests Magalhaes, "was always an elitist and a man of the right." Cardoso at a campaign stop during his run for president Cardoso wanted to leap straight to the stage of the idealized and seductive elite of socialist technopols commanded by Gonzilez without going through the Mexican experience, disregarding the fact that except for the pomp, the formula was essentially the same. But the irresistible emanations from Washington and the need to win international trust required that he sing praises to the glory of Carlos Salinas de Gortari. In the key statements of his political history, for example his farewell speech as he left the Senate in 1994, Cardoso elevated Mexico and to a lesser extent Argentina to the status of models pointing the way to possible success. Mexico was brought in as a partner to the North American bloc, and had a single-party government for more than 60 years, making it the darling for risk analysts specializing in the "emerg- ing" countries. In the end, of course, the country led the "credibility" formulation into a paroxysm. The darling of the technopol community turned out to be a house of cards built on a seismic foundation. The Mexican collapse has been a sort of chronicle of a death foretold, in which the same variables touted as indicating the success of the stabilization program-- total financial deregulation, controlled overvaluation of the currency (the narrow-band floating regime), absolute trade opening, and a deficit in the external current accounts (8.5% of GDP) increased according to the formulaic recommendations of the new globalizing order-are now crucified as the cause of death. Actual- ly, Mexico was already agonizing socially and politi- cally-Chiapas did not come out of thin air-when the bubble of prosperity ephemerally provided by the dom- inant model of stabilization burst. Statistics and reality were back-to-back; the debacle was only a question of time. But neither the intellectuals of the Washington Consensus nor the pragmatic social liberals were capable of recognizing it in time. Now there is no turning back. The end of the Mexican dream will inevitably condition the path taken not only in the short run, but also in the medium and long term in all the adjustment programs, including Brazil's. This will occur despite the understandable effort of opinion makers to try to convince the risk analysts that even though their stabi- lization programs are strikingly sim- ilar, their countries are different: Mexico is not Brazil; Brazil is not Spain; Spain is not Mexico, etc. At the nerve center of the consensus, the tendency is to forge full speed last year ahead with the adjustments. Rolling back now would be the real disaster. In this regard, IMF Director Michel Camdessus affirmed that the choice is between "advancing or advancing." In Brazil, Cardoso and his technopols indicate that they understand Camdessus' message and will follow the herd towards shortening the time period for undertak- ing the "structural reforms." What took over 12 years in Mexico must be done in two years in Brazil in the name of "credibility." As of this writing, however, a very discreet note can be heard that is out of tune with the resounding neolib- eral symphony, bringing some encouragement to those who believe that history is far from reaching its end. At ECLA, where Cardoso wrote-with Enzo Falet- to-the classic Dependency and Development in Latin America in 1971 during his Chilean exile, he recog- nized, in a speech this past February, "the arrogance, lack of sensitivity, political dimension, and lack of understanding on the part of the IMF for the democra- cies, values and beliefs of our society." Perhaps it was just the Chilean air, or perhaps even a spectacular arti- fice of illusion, but I prefer to think that under the emotional outpourings of his reencounter with the land where he made his most important theoretical contributions, Cardoso rediscovered some unfeigned part of his idealism and reconsidered the possibility of dancing a last tango of rejection of the neoliberal onslaught.
