Lula’s government is gaining strength, but the political space for transformations is limited by the institutional break-down inherited from the far-right government. Even so, important transformations are already becoming reality. It is not a question of lack of resources, but of control over its use. The financial drain continues to hamper deeper initiatives, and the global chaos does not help.

(Ladislau Dowbor)

These are three words I always say: first, government has to have credibility. Second: it has to ensure stability: economic, political, social and legal. And third: it has to have previsibility, so that people know what to do in this country. This is what I am promising. We will guarantee to the Brazilian people that this country will become a happy country again.

(President Lula)1

The common-sense approach is to identify the key structural challenges and seek practical solutions. The challenges are crystal clear: the environmental issue, the inequality issue, and the financial chaos. The systemic simplification that if we pursue individual advantages, the result will be the best possible for society is dead. The convergence of individual and social interests must be built into the system. This goes much beyond the “free market” plus some state regulation. It means systemic reorientation of what we do, whether in a corporation, in public administration, or in civil society organizations. At each level, we must seek to balance private interest with the common good. It is not enough to state that what corporations do is “not illegal.” After all, they make the laws.

This is not just about Brazil. The most important recent contributions to economic analysis focus precisely on the divorce between private interest and the common good. The invasion of our intimacy has reached an industrial scale and generates huge profits but no common good, as Shoshana Zuboff has so aptly shown. The information industry has become a manipulation system, also generating profits but also deep political deformations, as we see in Max Fisher’s The Chaos Machine, and absurd consumerism, as shown by Juliet Schor in The Overspent American. The arms industry, as well as so many economic areas such as the Big Pharma oligopoly, the communication platforms, the Big Oil cartel, and other activities controlled by corporate giants, have little contribution to the reduction of ecological and inequality dramas, even if they make big money.

This divorce between private interest and the common good has reached a catastrophic dimension in finance. The reason for the wider impact is that finance is not a “sector,” an industry delivering goods or a practical service, but a “means” area, which allows who controls it to define what activities will be funded in any sector. And since a financial institution does now have to wait for the government to print money – government-printed money, the papers we know, represent around 3% of ‘liquidity’ – the financial sector has grown out of proportion relatively to productive activities, the “end” areas that respond to what we need. With virtual money whirling around the planet and high-frequency trading, while governments and central banks operate on a fragmented national scale, the system got out of control: and when some regulation is decided, they still have the tax havens and financial secrecy.

Invisible Trillions, by Raymond Baker, presents the basic figures: while the world GDP, production of goods and services, is around $100 trillion dollars, “we have broad money at more than $120 trillion, derivatives at $600 trillion, and currency trading at $1,500 trillion. Capitalism, making ample use of the financial secrecy system, accumulates and toys with vast sums of money, which, as any rational analysis would confirm, need to be more productively utilized. The simple truth is that the world has far more money than it usefully employs, and this is putting the point as politely as possible.”(34) “What could be done with some of these trillions? Build hospitals, provide vaccines, educate children, repair infrastructure, clean up the environment, pay for alternative forms of energy, and expand peacebuilding.”(32) 2

This global financial drain has become a key issue: if financial speculation is more profitable than health services, for example, money will go to where it earns more, forget the environmental and poverty-related dramas. The huge popularity of Piketty's writings is linked to this “reset” of economic theory, showing that the “means” have taken over the “ends”: financial profits far outpace productive growth in the world. But particularly since the 2008 crisis, which has made the financial irresponsibility patent, an impressive wave of realism is changing the way we read reality.

Writings by Joseph Stiglitz, Mariana Mazzucato, Kate Raworth, Ann Pettifor, Brett Christophers, Michael Hudson, Marjorie Kelly, and so many others are bringing economic and social analysis down to earth, with the present system qualified as Rentier Capitalism, Surveillance Capitalism, Extractive Capitalism, Corporate Capitalism, Parasite Capitalism, or even as NeoFeudalism. The Oxfam report to the Davos 2023 meeting, Survival of the Richest, shows the dimension of the inequality drama and the loss of public control, while David Wallace-Wells describes The Uninhabitable Earth we are creating. It is a shock of realism, even if we continue to teach “free-market” and the Washington Consensus in our universities. “What’s become of the common good?” asks Michael Sandel in The Tyranny of Merit.

The Amazon forest is a good example: “Jair Bolsonaro, elected president of Brazil in 2019, apparently sees this vast resource as his country’s ticket to wealth. So, he has sacked environmental officials, weakened enforcement, and rejected the world’s condemnation of massive fires set to clear land, ‘giving rein to agribusiness giants, mining corporations, and developers big and small’. Global Witness, which has examined illegal logging for decades, alleges that funding for Brazilian agricultural projects in the Amazon comes from Deutsche Bank, Santander, Blackrock, American Capital Group, and others.” (Baker, p.46). This is where the money goes to, through modern financial giants, because it pays more. Can we reverse this trend created by global finance? Well, we do discuss ESG and gather at successive COPs…

The Brazilian dimension is a rich illustration of these global challenges, and it is particularly stark. As an order of magnitude, over a quarter of GDP is drained from productive activities to financial gains through diverse mechanisms. The last year Brazil had reasonable growth was in 2013, 3%. The inclusive model adopted between 2003 and 2013, with Lula and Dilma, generated an average GDP growth of 3.8%. In the following decade, up to 2023, with the austerity model, the economy was stalled, with only two sectors generating profits: primary goods exports and financial drain3. Neither is socially useful. The trend is global, but in Brazil, it has reached a grotesque level. This is a key understanding because the challenge is to bridge the chasm between corporate greed and the common good. Claiming ESG in image-building magazines is not sufficient.

The very strong international interest in Lula’s government is that his government represents a sort of “applied economics,” bringing the challenges down to earth within the very limited political space the elections gave him, more limited even than his two former administrations (2003-2010). The country needs structural change, but the government does not have the corresponding power. What is happening can be summed up as a progressive shift of policies, responding to the most necessary demands of the poor – this is two-thirds of the population in Brazil – aiming at improving their lives and simultaneously gaining support for wider measures. Negotiating what is necessary in unfavorable conditions is Lula’s Ph.D. It is his life.

He called it “putting the poor into the budget and the rich into the taxes.” The evident immediate scandal is hunger. Our grain production reached over four kilos per person per day, but it is for export, generating dividends, while hunger has expanded to 33 million, and 125 million are in food insecurity. Shifting money to the bottom of society is the most practical measure. The new Bolsa Família has been expanded, reaching an average of 705,40 reais per family. Five billion reais have been allotted to food in schools for around 40 million children in public schools. The food purchasing program (PAA), the national council for food security (CONSEA) and other institutions that had been extinguished by the former government are back. These are efforts similar to those undertaken in the former Lula administrations, which had led FAO to take Brazil off the list of countries with hunger in 20144.

As ever, Lula seeks the convergence of different ministries and institutions, public and private, around key problems or “missions.” More money at the bottom of society means more demand, more activities in food processing and commercialization, and particularly a stimulus for the ample family-agriculture area, the main food producer in Brazil. These were allotted 77 billion reais in support (Plano Safra Agricultura Familiar). Typical of the realistic approach, we are taking care of the immediate needs of the population, while negotiating with the powerful grain producers for export: these were allotted five times as much. But the organization gains at the level of the rural small-scale producers are also important, with the Pronaf (Programa Nacional de Agricultura Familiar). And with the stimulated food production by family farmers, the food security short-term measures will gain a permanent basis. Distribution will be met by production.

A similar role of initiatives has been taken in another dramatic area, access to health services. The public system (SUS) had been fragilized by the Temer-Bolsonaro governments in the name of financial austerity, which forced people into the financialized private health system. SUS is back; the “Mais Médicos” program making sure the poorer or more isolated regions have health services, support for private non-profit health organizations and other measures are reversing the dramatic situation of so many poor. The Farmácia Popular initiative has been reinstated, another kind of convergence of measures centered on final results.

Money at the bottom of society is more productive, both in terms of stimulating the economy and in terms of how much well-being a little money can buy. Important measures are the minimum wage, which increased for the first time in six years, while the Programa Desenrola is taking millions out of debt, lower salaries have been exempted from income tax, and female salaries must now legally be equivalent in similar functions, and so on.

Another strategic reorientation is public education. Expanding scholarships, research and development, digital inclusion, and similar initiatives have become a centerpiece of government policy. The understanding is that Brazil has to be hoisted to the knowledge-society demands. This is another line of action that had been so important in the former Lula administrations. The Ministry of Culture, closed during the right-wing administrations, is back.

The aim here is not to list positive initiatives as such but to suggest, by a few examples, a change in governance approach. Putting resources where they are most needed, negotiating every meter of political space occupied by the elites for the benefit of effective progress, hearing social demands of different constituencies (PPA Participativo, Conselhão) in an organized regular process, a kind of useful realism devoid of ideological proclamations. Will it work? Well, it seems to be working in Brazil, and Lula is in high demand because he delivers, and most of the countries in the world are facing similar challenges. This is not just about Brazil, it is about building back the social function of the economy.

Notes

1 President Lula Quote, July 8, 2023.
2 Raymond W. Baker – Invisible Trillions – Berrett-Koehler Publishers, Oakland, 2023.
3 For a comparative analysis of the inclusive and the austerity models, see Dowbor, L., & Cezar, B. B., 2022. Brazil Facing More Than the Pandemic: Distribution and Exclusion in Economic Policy. Latin American Perspectives, 49(5), 14–33.
4 The numbers mentioned here are from Gov.br Seis meses de governo, as well as Em 100 dias, 250 realizações.