December 2017
In 1982, Professor Simon Schwartzman, the President of the Institute for Studies on Labor and Society (IETS) in Rio de Janeiro, wrote that Brazil demanded a transition in which ‘the State definitively overcome its patrimonial, bureaucratic and authoritarian tendency for a more modern and efficient structure, open to information and innovation.’ Schwartzman echoes a classical reading (preceded by the classic texts of Sérgio Buarque de Holanda and Raimundo Faoro) of Brazilian political history, shaped by two long dictatorships (Vargas, 1930–45, and the military regime, 1964–85). The tradition associates patrimonial elements – from the Portuguese colonization to the nineteenth-century Empire – with the slow construction of a bureaucratic establishment, named ‘Estado Novo’ under Vargas in the thirties, and consolidated by the military power in the seventies. This super-bureaucratic machine became even more rigid in the 1988 Constitution.
Here we have our principal contradiction: the Brazilian Constitution promised much, in terms of individual and social rights, but the institutional framework that was supposed to guarantee these rights has proven archaic and ineffective. To draw a balanced analysis, more than three decades on from the democratic transition, there have been some positive developments: the army has been integrated in republican life, state institutions are working independently, and a range of cash transfer programmes are operating reasonably well, but the quality of public services is at a critical point and the public deficit lies at around 2.5 per cent of GDP this year.
The argument I present here suggests that Brazil is a classic example of what Francis Fukuyama identifies as a state at the same time large and weak. State weakness refers to a weak capacity to assure ‘basic state functions such as the enforcing of law and the protection of property’. State scope is defined by the number of functions a state performs. Brazil has a national tax burden in the order of 32 per cent of GDP (the biggest in Latin America), and an active (or intrusive) state in the most diverse sectors of national life. Active regarding the credit supply to the productive sector, through BNDES, in the energy sector, via Petrobrás and Eletrobrás, as well as in a wide variety of services, ranging from the management of airports to a public TV system.
There are some clear signs of Brazil’s institutional backwardness. The first of these concerns economy productivity, stagnant since 1980, even as the country goes through its demographic bonus period. Associated with this phenomenon is the inefficient regulation that makes the economy uncompetitive and a hard land to innovation. An example of this is the country’s weak position in the World Bank ‘Doing Business’ Economy Rankings. Brazil ranks 125th overall and 22nd in Latin America. One indicator in particular reflects the Brazilian drama: the country ranks 184th regarding the tax system. The National Congress, in turn, has made no progress towards tax reform, since public and private actors understand any change as a zero-sum game, lacking a minimum consensus on how to advance the reform.
This is a good example of a constitutional failure to fulfill the crucial task of state coordination. The question remains: how can a dysfunctional welfare state deliver the generous set of rights promised by the Constitution? How can we explain that a constitution full of socio-economic rights provisions created, after all, a long-lasting social tragedy? In the decades after the 1988 Constitution, the Brazilian middle class migrated from public schools and the public health system to services provided by the private sector. The silent collapse of the Brazilian welfare state itself represents a systematic source of inequality, double taxation and transfer of resources from the whole of society to the middle class of the public sector. This is what we could characterize as the unintended consequence of a generous but badly designed constitution.
A dysfunctional political system
Brazil has adopted an open-list system of proportional representation, with a broadly liberal approach to the corporate funding of political campaigns. In 2015, the Supreme Court decided to prohibit this private funding system. However, it lasted for three decades, producing devastating results for Brazilian democracy.
We have here a dangerous combination between private funding of political activity and the large scope of the state – with wide capacity to intervene in economic sectors, to grant fiscal incentives and approve public credit. Since the end of the 1980s, over the course of fourteen elections, this was a recurrent phenomenon: after having sponsored electoral campaigns, the same business leaders were negotiating public benefit with the politicians they had funded. Academic studies clearly show a positive correlation between electoral support and the appreciation of corporates assets. This system was the most visible aspect of Brazilian political new patrimonialism, since the return of democracy.
Professor Bolivar Lamounier, the founding president of the Sao Paolo–based Institute of Economic, Social and Political Studies (IDESP), has stated that Brazil is ‘a notorious case of partisan underdevelopment. With a discontinuous party history, we reach an exacerbated multipartyism and an individualistic and permissive electoral system’. In a country of continental dimensions, the reality of expensive electoral campaigns adds up to a system of low accountability. Even though there is a consensus in society and in the political system about the urgency of political reform, there is anything but consensus on its content. In the last few year, Congress discussed the institution of a mixed-member proportional representation, similar to Germany or New Zealand, yet the project failed to achieve minimum consensus. Congress finally approved the reintroduction of a timid election threshold of 3 per cent of national votes to be fully enforced in 2030, and a public funding for elections of about $500 million.
As a consequence of this lack of effectiveness of the political system, the Supreme Court has taken a leading position in political matters. In 2006, the Court nullified the institution of an election threshold of 5 per cent, approved by Congress ten years earlier. The decision was taken in the name of freedom of speech and political representation of citizens. Had it been maintained, the Brazilian parliament would have an average of eight parties, instead of the twenty-five we have today, in an extreme case of party dispersion. Ten years later, the Court banned the corporate financing of electoral campaigns. We could say: one bad and one good decision. The most salient point, however, is that it established a pattern of chronic interference by the Supreme Court in legislative matters.
We could think of this as a simple confrontation between a positivist approach of rights against a ‘progressive’ one. But what is going to happen when a flexible interpretation of rights is used in favour of ‘bad values’ or ‘bad rights’? And who exactly defines what is bad or good – the law or the democratic process? The resolution of this question is of crucial concern for political stability in Latin America.
Political culture: an unstable democracy and a polarized democracy
The Getúlio Vargas Foundation recently published a survey showing that 34 per cent of Brazilians do not agree at all with the idea that ‘democracy is the best system of government’. The same survey shows that only 7 per cent of the population says they trust political parties, against 42 per cent who trust in the judiciary and 46 per cent who trust the army. Several studies show similar results related to trust patterns in democratic institutions. There is a strong decline in indicators, accentuated since the large-scale street demonstrations in mid-2013.
This picture is consistent with what is happening in great democracies around the world. The World Value Survey has been recording a declining public confidence in democratic values over a long period of time, and for the 11th consecutive year, Freedom House reported a decline in global freedom. But those data give rise to concern. As Hennie Kotze and Carlos Garcia-Rivero emphasize in their work on political confidence in seven contemporary democracies, ‘If political confidence or trust in government institutions is declining, the survival of the governing elite and, at times, the democratic regime itself is at stake.’
For the first time since the transition to democracy, there are forces on opposing sides of the Brazilian political spectrum that are developing a systematic discourse that undermines trust in democratic institutions. On the left we have the ‘parliamentary coup rhetoric’, whereby the Workers Party and its allies persist in contesting the constitutional legitimacy of the impeachment of former President Rousseff, despite the fact that it followed the constitutional process and was chaired by the Brazilian Supreme Court President. On the right, a diffuse cultural conservatism is expressed across social networks, typical of our internet democracy, even extending to a nonsensical appeal to a ‘military intervention’.
Despite these political currents, one cannot conclude that there exists a credible threat to Brazilian democracy, although it would be fair to say that it has acquired an unprecedented degree of polarization and instability. In the months before the impeachment process, The Economist magazine predicted that the process would ‘poison Brazilian politics’ for a long time. They were right. And this context of great instability will continue until the October 2018 elections.
It is important to pose the question: Is the country capable of carrying out reforms? It was the case with Plano Real in 1993; the Fiscal Responsibility Law in 2000; and the establishment of a reasonable social protection system, based on cash transfer programmes, over the last twenty years. Even now, under an unpopular and transitory government, Congress approved some important advancement – including a labour reform and a Constitutional Amendment constraining the expansion of public spending. Some commentators characterize this as a process of ‘cutting rights’. I disagree. This is a classic Latin American misunderstanding about the meaning of a right. If we can’t ensure a sustainable process to guarantee the provision of services necessary for citizens to exercise a particular right, the right might as well not exist at all. Such reform, for instance, serves as a shield against the almost ineluctable tendency of the Brazilian political system to fiscal irresponsibility.
The same applies for reform of the pension system. In a developing country like Brazil, a system that enables someone to retire at fifty-two or fifty-three years old will never be sustainable. Brazil spends 13 per cent of its GDP on its pension system, a similar figure to that of much more established European countries. Despite the need for drastic change, pressure from the unions and the accompanying Congressional timidity is standing in the way of reforms necessary to salvage the fragile welfare state.
The idea of modernization of the state, which was very much on the agenda during the 1990s, is fundamental to create a society in which we can ‘take rights seriously’, to use the well-known phrase of Ronald Dworkin.
The final question then becomes: Can we make progress along the difficult path toward modernization of the state without a much greater degree of public consensus? It is a typical paradox of Latin American civil society that pressure on the political system to institute individual and civil rights is undermined by a naïve vision of institutional design in order to increase economic development and create a more inclusive society. In recent years, we are seeing a new set of think tanks and civil movements more open to ideas relating to fiscal responsibility and economic reform. But we are far from a minimal level of consensus on these issues.
As the presidential elections loom later in the year, the greatest risk to the country is the resurgence of populism, whether from the left or the right. Such populist movements derive their persuasiveness from the almost magical thought – omnipresent in the Brazilian tradition – that everything can be solved by a providential leadership that frees society from the burden of difficult political and legislative decisions. There are signs of the emergence of new reformist movements within civil society, both liberal and social democratic, but only the future will tell whether this points to a substantive change in Brazilian politics.
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Fernando Schuler is a professor and researcher at Insper, São Paulo, Brazil.
