The First Months of Lula’s Government and Neo-Liberal Stuckness

On January 1, 2023, the scorching summer sun in Brasilia didn’t diminish the ecstasy experienced by the thousands of people who flocked to the Federal District to witness the inauguration ceremony of Luiz Inácio Lula da Silva, beginning his third term as President of Brazil. After four years of ultra-liberal distress in the economic sphere and a rise in authoritarian politics, left-wing groups were celebrating. Lula’s entry into the Palace accompanied by representatives of the most vulnerable and oppressed strata of the population was highly symbolic, creating the expectation of a new era, one with a substantive democracy founded on inclusion and social justice. Yet it took just seven days for the mood to change. On 8 January, Brazil and the world were shocked by images of the same Brasilia now filled with supporters of Jair Bolsonaro in a coup attempt. The attack was defeated and the Supreme Federal Court (STF) responded vigorously, but the sensation of a not-so-new era returned: projections of a transformative future gave way to the feeling of imprisonment in a past that permanently restores our historical dilemmas to the present.

In Alter-Politics, Lebanese-Australian anthropologist Ghassan Hage develops the concept of stuckness to refer to the state of being and feeling existentially “stuck”, a feature of the contemporary world, as opposed to the “existential mobility” characteristic of human action. The crisis in which we live leads to a sense of “existential immobility”, meaning the feeling of stuckness is perceived as inevitable, as something to be permanently endured (Hage, 2015: 38). I use this term to analyse the first months of Lula’s government because I understand that, despite some attempts to break with the neoliberal logic and with the prevailing authoritarian forms of Brazilian political-economic organization, conservative forces have succeeded in creating many obstacles to the implementation of the programme that was victorious in the elections.

This article is divided into three analytical axes: economic, in which I present the main dilemmas faced by the government, with an emphasis on the apparently frustrated attempt to overcome austerity; domestic politics, the chronicle of a death foretold since the 2022 legislative elections; and foreign policy, which updates the attempt to improve Brazil’s position in the international division of labour.

The Haddad Plan and Neoliberal Stuckness

In the immediate aftermath of Lula’s victory, discussions began on how to fulfil the electoral promises in the devastating economic scenario left by Bolsonaro. Brazilian legislation provides for a political transition in the period between the presidential election and the inauguration. During this time, a team appointed by the president-elect receives data and information to begin the administration and implement the policy programme they took to the election. November and December were months of intense debate about the discrepancies between the austere budget planned by Bolsonaro for 2023, and the social expectations coming from the Lula campaign, which suggested that increases in state spending would be necessary.

The results of this opposition were positive for the Lula camp and contributed to the optimistic atmosphere. The negotiations resulted in the transition constitutional amendment, which guaranteed an increase of R$ 145 billion in spending by 2023, the amount required for the new income transfer programme announced by Lula, as well as for increasing the minimum wage above inflation in the first year of government. But the main achievement in the transition was the removal of the infamous spending ceiling from the constitution.(1) The spending ceiling was a constitutional amendment enacted by Congress in 2016 establishing a new fiscal regime of strict austerity. The measure limits the growth of public spending to the same amounts spent in the previous year, adjusted for inflation, for 20 years following enactment. According to the transition amendment, the government should institute a new fiscal regime by August 2023, but through a supplementary law, meaning that austerity will no longer be inscribed in the constitution.

The proposal of a New Fiscal Framework (NFF) was presented in March 2023 by the Minister of Finance, Fernando Haddad. Unlike the spending ceiling, the proposed new rules allow for real growth in primary expenditure, even when there is a drop in tax revenue. However, the new rules on primary results, on the composition and ceiling of public spending and on investments, and the guiding principle of expenditure restraint in the medium and long term remain, which favours the servicing of debt. Among economists, there were three positions: the orthodox neoliberals celebrated the content of the bill, which does not break with the principle of fiscal austerity; among the heterodox, some consider the proposal a good one given the unfavourable institutional environment, which is why it should be supported;(2) and some consider it a mistake that will undermine Lula’s economic and social promises.(3)

According to Leda Paulani, professor at the School of Economics and Business Administration of the University of São Paulo (USP), the proposal is a great advance, since it establishes “an arrangement that is minimally acceptable to the financial market and, at the same time, gives President Lula room to implement his government programme”.(4) This view is opposed by Pedro Paulo Zaluth Bastos, professor at the Institute of Economics at Campinas State University (Unicamp). He believes that the commitment to achieve a primary fiscal surplus and the establishment of rigid limits on the growth of spending “represents a neoliberal logic of the structural reduction of the state’s participation in the economy”. The old orthodox liberal mantra is reiterated: economic growth would come from market confidence to leverage private investment. The problem is that, since at least the 1930s, the Brazilian economic growth model has been the opposite, leveraging private investment by expanding public spending.(5)

Hence the assumption of the Haddad Plan is the same that guided the defenders of the spending ceiling of Bolsonaro’s former Minister of Economy Paulo Guedes: through a restrictive fiscal policy, there would be a margin for an expansive monetary policy. It turns out that the same Guedes secured the political independence of the Central Bank of Brazil, and today the government has very little control over monetary policy. For this reason, at the same moment that Haddad presented the proposal for a new fiscal regime, the government began to press for a reduction in the interest rate. So far, it has had little effect: the Central Bank follows the mantra that to combat inflation it is necessary to maintain the rate at 13.75 percent p.a., one of the highest rentier remuneration rates in the world.

This is the straitjacket from which the government cannot escape, and which brings a sensation of stuckness, the neoliberal prison that turns the “there is no alternative” of a bygone past into an eternal present. By placing a ceiling on the growth of public spending, the NFF will create a medium-term trend of decreasing the state’s share of GDP, which will make the new government’s social policy promises unviable, putting the minimum wage rise at risk, as well as the fulfilment of the constitutional principles of investment in social policies.(6) Whether seen from the most optimistic or pessimistic perspectives, there is the common denominator of the political impossibility of breaking with financial dominance, which is socially and institutionally guaranteed. The interests governing the new economic policy are those already well known from the neoliberal phase of capitalism, even if there is now some tension through the presidential discourse on the need for social responsibility.

The Uncertainties of Domestic Politics

If the sense of stuckness in the economic sphere is prevalent, in politics it has become a truly national drama. Events after 8 January produced some hope, due to the immediate reaction of the Supreme Federal Court and the Federal Government in the investigation and punishment of the Bolsonaristas who invaded and ransacked the buildings of the three powers of the Republic. However, the first months of government seem to confirm the pessimistic forecasts that stemmed from the legislative election results in 2022. The Workers’ Party (PT) elected only 68 deputies out of 513 seats in the Chamber of Deputies. If the other centre-left parties that supported Lula are included, the figure is 138 seats, far short of a majority. In contrast, Bolsonaro’s Liberal Party (PL), elected 99 deputies, and the sum of parties that make up the so-called centrão (big centre) reached at least 238 seats.

The term centrão refers to a group of right-wing clientelist parties that unite to control the Lower House and bargain with the executive for advantages and favours. This means that the congressional command in 2023 remains with the same forces that supported the Temer and Bolsonaro governments. It is led by federal deputy Arthur Lira, who was reappointed to the presidency of the Chamber of Deputies with 464 votes out of a total of 509 on 1 February, 2023. Lula’s government found itself in a dilemma between launching its own candidate with no chance of victory or supporting Lira’s re-election and avoiding a political crisis at the beginning of the administration. The second option prevailed, so the vast majority of deputies kept the command of Brazil’s main legislative body in the hands of someone considered among those responsible for ensuring that Bolsonaro was able to govern, for shelving all the accusations against the former president, and for conducting a renewed type of patrimonialism that characterised the period, namely the secret budget. This is a mechanism created by Bolsonaro’s administration and operationalized by Lira that involves the distribution of budget funds to ensure support from parliamentarians to the government. The practice was ruled unconstitutional by the Supreme Federal Court in December 2022, a political victory for Lula.

The fear that Lira and his parliamentary majority could make governability unviable began to materialize in the first months of 2023. In April and May, Lula suffered his first defeats in voting in the lower house. In September 2020, Bolsonaro approved a new legal framework for basic sanitation in the country, a measure that will set off the privatization of the sector. At the beginning of his administration, Lula enacted a decree allowing state-owned companies to provide services without bidding in municipalities in metropolitan regions, urban agglomerations, or micro-regions. This upset business and the Chamber of Deputies annulled the effects of the decree by 295 votes to 136.

Another defeat for the government occurred in the processing of a bill to counter fake news, with measures to regulate the internet. There was an immediate reaction from big tech corporations — such as Google, Meta, Twitter and TikTok — which in addition to lobbying Congress propagated unfavourable coverage of the bill and suppressed favourable coverage. Without a majority for its approval, Lira withdrew the bill.

The unfavourable scenario is completed with the creation of two Parliamentary Commissions of Inquiry (CPIs) that go against the government’s interests: to investigate the crimes committed on 8 January in Brasilia; and to investigate the actions of the Landless Workers Movement (MST), which is a renewed attempt to criminalize the largest social movement in the country.

The investigation of the January coup uprising was not of interest to the government because of the possibility of it becoming an instrument to produce fake news by the Bolsonarist opposition, which is propounding the narrative that it was Workers’ Party and MST activists disguised as Bolsonaro’s supporters who promoted the chaos in the federal capital. At least Lira guaranteed a governing majority on the commission. The CPI against the MST, on the other hand, has the main purpose of intimidating the social movements that could pressure the government to adopt policies in the interest of working and poor people. With the possible blocking of confrontational actions not only by landless workers fighting for agrarian reform, but also by homeless workers fighting for urban reform and other social and trade union movements, there may be greater difficulty in countering the institutional minority with a social majority in favour of the structural changes necessary to break with neoliberal dominance.

In the streets, the scenario remains one of apathy. Lula’s voting strength does not translate into a mobilized social bloc in favour of implementing the programme with which Lula won the election. Examples of this are that few people observe International Workers’ Day and few attended a demonstration called to pressure the Central Bank to lower interest rates. The Bolsonaro opposition, on the other hand, in addition to finding an increasingly favourable institutional environment in Congress, still has a mobilized social base, which is waiting for new calls to take to the streets in future coup attempts.

This means that a political time bomb is forming, composed of two main parts. The first, economic, lies in the combination of Central Bank independence and fiscal austerity, which will make it difficult to fulfil the promises of expanding social policies to face the deep crisis Brazil is experiencing. The second, political, is formed by the high cost of maintaining institutional stability, which will grow day by day, with Lira inflating the price to maintain a minimum of cohesion in what is now considered the government bloc in the House. This part will emit many sparks in the form of corruption accusations.

If the worst case scenario of a new combination of economic, political, and social crisis actually eventuates, the threats are many: a new coup, now with fascist overtones, led by Bolsonarism; the complete capture of the government by the neoliberal forces that dominate Congress, but without institutional breakdown; or the formation of a fake presidentialism, in which Lula formally maintains his position, but Lira becomes de facto president. Defusing this bomb and breaking up the parts that compose it will require a great deal of mobilization of those who elected Lula and are committed to the social contract established by the 1988 constitution.

In Foreign Policy, Lulism’s Hopes

With the feeling of stuckness in the economic and political spheres, hopes for transformation fall on the area of greatest dynamism at the present conjuncture: international relations. According to pro-government groups, if successful, external action can transform domestic economic conditions and strengthen Lula’s position. In this area, there is a palpable change in relation to his predecessor: the goal is to leave isolationism behind, to break with direct subordination to the US, and to resume an “active and assertive” policy, that is, one that assumes its own agenda, without automatic alignment with any of the global powers, and without fear of taking a position on global issues.

Not surprisingly, the president’s personal dedication in this field is intense, with visits already made to China, the USA, and Argentina, among other countries. In Latin America, the proposal is to resume the integration programme that characterized the Lula and Rousseff governments, with a view to forming a bloc that progressively acquires autonomy in relation to the great global powers, and if possible, in closer articulation with the European Union, which is also caught between Western and Eastern hegemonic interests.

Brazil’s economic recovery continues to be highly dependent on the growth of Chinese demand (now under attack from the US), which is also fundamental for its balance of trade. Therefore, it is in the country’s interest to bargain with both sides of the dispute for an improvement in its commercial position. But the recessionary scenario in Europe and the US means hopes are shifting toward a Chinese recovery that, if it happens, may result in increased tax revenue as early as 2024 and allow for public spending growth in line with the new fiscal framework. As Bastos explains, “a happy coincidence between the Chinese recovery and the rapid increase in tax revenues by June 2023 could allow public spending to grow close to 2.5 percent per year in 2024 without threatening the primary fiscal result target, provided that tax revenues do not plummet in the face of a recession”.(7)

But the government’s expectations go beyond an increase in tax revenue, they refer to a repositioning of Brazil in the international division of labour. In recent decades, the country has undergone what is referred to as a reprimarization of the economy, with regressive specialization, that is, the consolidation of the country as an exporter of basic commodities and an importer of consumer goods. This has resulted in a chronic deindustrialization that makes labour relations more precarious and increases poverty.(8) As economist Marcio Pochmann explains, dependence determines “national dynamism fed by a constrained and asphyxiating domestic market for the production and consumption of industrial goods, increasingly coming from abroad”.(9) From this stems the government’s goal, in negotiations with the US, China, and the European Union, of guaranteeing some degree of technological transfer to facilitate domestic production.

The dilemma, however, is posed by global conditions. The conflicts between the main national states all seeking to improve their position in the international division of labour are intensifying. As Rugistky explains, the first decade of the 21st century saw the emergence of a “triangular articulation of capital accumulation”, which divides the global economy into three poles.(10) The first, concentrated in the Transatlantic North and represented mainly by the US, comprises demand-generating countries, major centres of the consumption of most goods. The second is made up of the world’s new factories, located mainly in East Asia (but also comprising Germany), which concentrate on the global production of goods. The third includes “the countries relegated to exporting primary products and industrial inputs to the world’s new factories”. Here we have the South American, African and other countries, like Russia. This means that the periphery is “split down the middle”, and Brazil is relegated precisely “to the most subordinate vertex of the triangular articulation, serving as a latifundium and mineral reserve of global capitalism”.(11)

Rugistky highlights three fundamental consequences of this model. The first was the “extraordinary expansion of the working class available for capitalist exploitation, which represented an unprecedented leap from relative overpopulation”, constituting an “immense industrial reserve army” in the global system of production, which has direct implications for the conditions of union and popular struggles. The second was the growth of world per capita GDP and gross fixed capital formation, which rose for the first time in decades. “The average annual growth rate of world per capita GDP was 2.08 percent between 2000 and 2008, comparable to that of the 1970s and higher than that of the 1980s and 1990s.” The third is the mode of control of the hegemonic centre: “the commercial flows that defined the triangular articulation had as a counterpart financial flows that deepened the financialization of contemporary capitalism”.(12) To sustain the consumer centre and channel to itself the profits of production, Wall Street deepened the financialization of capitalism. “Almost 70 percent of the profits earned globally by these countries [the world’s factories] were then transferred back to the United States in the form of capital flows to Wall Street”.(13)

This triangular articulation fell into crisis with the financial collapse in 2008 and the growing difficulties of the hegemonic centre to maintain consumption financed by credit. And from this crisis another one unfolds, in the form of a dispute: tensions increase between the consumer and producer poles in the search to improve their position or redefine the hegemonic centre of the global production system. This is the contextualization of our economic condition of stuckness that has lasted for decades. What can Brazil and Latin America do to leave the most subordinate vertex of the triangular articulation? Lula’s “active and assertive” foreign policy seeks an answer that dependency has so far blocked us from finding.

It follows that we need to confront, from an internationalist perspective, the last form of stuckness that I want to mention here: that of the left, subjected to decades of the dismantling of trade union and party activity that characterises neoliberalism. Traverso defines such a process as the formation of a “left in melancholy”.(14) The proclaimed end of history takes shape for the left as the end of utopias and the emergence of a melancholic vision of the world that fixes the present as immutable and the past as the memory of defeat.(15) Revolution has gone off the agenda and democratic ideals have been emptied of substantive content to become a political way of imposing an individualist and competitive order,(16) with the “intense subjectivization” of capital accumulation and the redundancy of the public sphere.(17)

In Brazil, in the resistance to Bolsonaro and the 2022 electoral campaign, there were some good moments of overcoming the mood of defeat and melancholy, the rupture of a closed presentism of suffering that pried the future open and made Lula’s victory possible. I refer, for example, to the popular committees and the agitation and propaganda brigades that organized events and spaces for dialogue with the aim of collectively constructing solutions to the impasses faced. Neoliberal stuckness is opposed by mobility, an existential condition. The question is: faced with the unfavourable scenario of financial dominance that governs the economic, political, and social destabilising mechanisms, how can we raise experiences of local resistance to the condition of real political alternatives? I have no easy answer, but the problem is global, and if we do not face it collectively, we run the serious risk of succumbing to war, oppression, and exploitation.

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1.Santos, J. V., “Novo Arcabouço Fiscal: Um Movimento Possível Dentro da Camisa de Forças. Debate com Luis Nassif, Leda Paulani e José Carlos de Assis”, Instituto Humanitas Unisinos, 2023.

2.Santos, “Novo Arcabouço Fiscal”.

3.Bastos, P. P. Z, “Quatro Tetos e um Funeral: O Novo Arcabouço/Regra Fiscal e o Projeto Social-Liberal do Ministro Haddad”, Nota 21 do Cecon, Instituto de Economia da Unicamp, 2023.

4.Santos, “Novo Arcabouço Fiscal”.

5.Bastos, “Quatro Tetos e um Funeral”.

6.Bastos, “Quatro Tetos e um Funeral”.

7.Bastos, “Quatro Tetos e um Funeral”

8.Rugitsky, F., “Jogo Aberto: A Economia Política do Interregno”, in O Brasil no Inferno Global: Capitalismo e Democracia Fora dos Trilhos, edited by André Singer, Cicero Araujo, and Fernando Rugitsky, Sao Paulo: FFLCH, 2022, v. 1, p. 33–80.

9.Pochmann, M., “A Revolução Tecnológica Informacional com a Subsequente Superindustrialização dos Serviços Altera Profundamente a Natureza do Trabalho. Entrevista especial com Márcio Pochmann”, Instituto Humanitas Unisinos, 2023.

10. Rugitsky, “Jogo Aberto”

11. Rugitsky, “Jogo Aberto”

12. Rugitsky, “Jogo Aberto”

13. Varoufakis, Y., The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy, London: Zed Books, 2011, cited in Rugitsky, “Jogo Aberto”.

14.Traverso, E., Left-Wing Melancholia: Marxism, History, and Memory, New York: Columbia University Press, 2016.

15.Traverso, Left-Wing Melancholia.

16.Giller, D., “Tiempos de Derrota: Revolución y Democracia en el Debate Intelectual de Izquierdas Latinoamericano”, Izquierdas (Santiago), 2021, p. 50.

17.Oliveira, F., “Privatização do Público, Destituição da Fala e Anulação da Política: O Totalitarismo Neoliberal”, in F. de Oliveira and M. C. Paoli, Os Sentidos da Democracia: Políticas de Dissenso e Hegemonia Global. Petrópolis: Vozes, 1999.

References

Bastos, P. P. Z, “Quatro Tetos e um Funeral: O Novo Arcabouço/Regra Fiscal e o Projeto Social-Liberal do Ministro Haddad”, Nota 21 do Cecon, Instituto de Economia da Unicamp, 2023.

Giller, D., “Tiempos de Derrota: Revolución y Democracia en el Debate Intelectual de Izquierdas Latinoamericano”, Izquierdas (Santiago), 2021.

Hage, G. “Alter-politics: critical anthropology and the radical imagination”. Melbourne: Melbourne University Press, 2015. 

Oliveira, F., “Privatização do Público, Destituição da Fala e Anulação da Política: O Totalitarismo Neoliberal”, in F. de Oliveira and M. C. Paoli, Os Sentidos da Democracia: Políticas de Dissenso e Hegemonia Global. Petrópolis: Vozes, 1999.

Pochmann, M., “A Revolução Tecnológica Informacional com a Subsequente Superindustrialização dos Serviços Altera Profundamente a Natureza do Trabalho. Entrevista especial com Márcio Pochmann”, Instituto Humanitas Unisinos, 2023.

Rugitsky, F., “Jogo Aberto: A Economia Política do Interregno”, in O Brasil no Inferno Global: Capitalismo e Democracia Fora dos Trilhos, edited by André Singer, Cicero Araujo, and Fernando Rugitsky, São Paulo: FFLCH, 2022, v. 1, p. 33–80.

Santos, J. V., “Novo Arcabouço Fiscal: Um Movimento Possível Dentro da Camisa de Forças. Debate com Luis Nassif, Leda Paulani e José Carlos de Assis”, Instituto Humanitas Unisinos, 2023.

Traverso, E., Left-Wing Melancholia: Marxism, History, and Memory, New York: Columbia University Press, 2016.

Varoufakis, Y., The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy, London: Zed Books, 2011.