An apology by a Brazil Optimist . Brazil grew faster than any country in the world from 1900-1979.In my opinion the economic decay must have started in the early or mid seventies. First’ the military dictatorship which came to power in 1963 was growing older and more corrupt but also it was not clear in the 70’s what economic model an emerging country should follow. Brazil choose the import substitution model and big State controlled enterprise. Remember the Cold War was still going in an Capitalism had still not beat it’s “Anemic Foe”(The Economist)This in my opinion was their biggest mistake .Brazil introduced a Socialist model on a people who much like the Italians respected first the family ,then the local community ,then the state and lastly the national authorities(a look at Brazilian history from 1500-1800 will reveal a country who lived mostly by individuals exploiting vast natural resources with much less governmental control than the US experienced)The Socialist system may have kept a good Russian marching in some kind of order for 80 years but not a Brazilian. Anyhow, corruption became rampant, bad decisions were made by the State and the pie stopped growing as fast but population growth continued. By this time the Civil Service was full of people on the payroll, some who never came to work even one day. Everyone knew this was going on but ,so what ,the government is paying and Brazil was a country of rapid growth and immense recourses. For the middle and upper middle class state jobs were easy to come by and were fairly good pay with excellent benefits(lets call them the Privileged Middle Class).No special education was needed, if you were from the right class or group you had a job .Even if not a full state job, there would be a job in a large state connected construction company, state oil company ,or state bank. Unions were also included in this special group and a union job was also an option. Retirement was 20-25 years of service at 100%(or greater) of your working salary .By the time the discredited military was leaving power in 1981 the per capita pie was shrinking. This was the worst time ever to write up a new constitution with the Elite(top 2-3% very wealthy) and Privileged Middle Class in power and in the early phase of a squeeze on their privileges (lets assume 70% of population below middle class-poor and low middle class).This constitution solidified their gains allowing benefits such as these incredible retirements to continue. It even created a special 20 year 100% of salary retirement program for high risk fields that included journalists and University professors(I wonder why?)
As the economic pie continued to shrink relative to the population growth, some of the Privileged Middle Class began to get squeezed some more. In my wives family her first two brothers got their jobs but the third and fourth didn’t despite their mother frantic efforts .Something had to give, what was it?-----look no further than the 70% earning one minimum wage outside of state service. Just like the well off in the USA now, the Privileged Middle Class needed their friend—inflation. The wealthy and educated classes could protect themselves from inflation through housing, financial instruments, and new laws indexing their benefits and salaries to inflation. The poor didn’t have these options and minimum wage which had fallen from about $400 a month in the 60’s was around $140 a month in 1981 and by 1992 was about $40(It was actually worse than this as with inflation of 30% a month their money had lost some value by the time they spent it) I was reading an editorial in Brazil at around this time and they noted that the talk on the street was that if this continued there would be a civil war as people would be starving. The editorialist said to open your eyes and look around ,that Brazil was in a civil war with more people dying of violence on the streets every year than the Civil War in Yugoslavia, which was raging at that time. In Brazil they do everything different, even civil wars he opined Remember, even the University Professors and Journalists had been bought off , this was a civil war without leaders.
Well, if things got any worse people would be dying on the street and something had to give and it did. Only with a gun against their head did they make these changes(may be our case too).The elite, whose hands had been joined with the hands of the Privileged Middle Class, let go of their hand and extended it to the poor . Fernando Henrique was elected president in 1992 and did away with inflation within a year, with an almost immediate doubling of minimum wage to about $80 a month. He won with the help of the elite, the poor, a portion of the middle class who were too late for their privileges and some of the Privileged Middle Class who thought they would get benefit from the changes without loosing anything(they were wrong).This shift of wealth to the poor had to come from somewhere and that was from the privileged.
Fernando Henrique did do away with inflation but in a major mistake fixed the Real near1:1 with the $.This may have been needed at first to do away with inflation but he was afraid to let this peg go until after his re election. With the Real pegged at this high artificial value Brazilians went on a spending spree (sound familiar).It was cheaper to go to the U.S. or Europe for vacation than their own backyard. There were more Brazilians going to Disney World than any other nationality. Brazilians borrowed in dollars and rapidly became indebted. The economy was slowing down and the election coming up and he just squeezed into a second term. This time the Privileged Middle Class was his rabid foe(fool me once shame on you…fool me twice shame on me).The poor were not fooled and put him back in office.
Safely elected, within two months the currency peg was history. Everyone shared the pain but the poor remained better off. Fernando Henrique was much less popular but struggled on trying to cut out the high cost privileges with the middle class fighting all the way. At the next election he picked a dull successor Jose Serra. In the meantime Lula, a three time loser in presidential elections, was back and talking like a moderate. He wanted to win and I feel by this time had clearly formed a pact with the elite and was an acceptable candidate to them. The Privileged Middle Class saw him as their savior. Was he not a Union leader and long time defender of their gains? Well, Lula won and has been a good President. He has changed from supporting the privileged to leading the country .I see him much like Ronald Regan. He is a nationalist with street smarts and charisma and able to pick the right people for the right jobs and appears to really want a better Brazil for all.
There you have it! A Brazil where the elite, to save their own skin, have abandoned the Privileged Middle Class and walk hand in hand with the poor. They walked to the edge of a cliff and peered over and made the change just in time. The old order could not last and something had to be done. A stable Brazil is in their interest, and growth is a must. Brazil today is still a country were the privileged fight for what they have, but their numbers grow smaller and like the Soviet Union the truth is coming out and hard to put back in the bottle. Thus my hope in Brazil |
