by Zirin, Dave
Lula’s Rise
Luiz Inácio Lula da Silva is known by a single nickname, Lula, in the style of the nation’s great soccer players. And like soccer in Brazil, his reign as president feels larger than life, with the tall tales becoming even more burnished depending on who is doing the telling. It seems that almost everyone, friend and enemy alike, has a personal favorite story involving the labor leader turned head of state. To me, the most evocative, if unflattering, Lula story starts in 1998. That year Brazil, still reeling from record inflation, was granted the largest rescue package in history of the IMF, as described in the last chapter. The loans totaled more than forty-one billion dollars, and the conditions tied to them included deep cuts in Brazil’s already tenuous social safety net. Lula, like all labor leaders, was on the front lines protesting the aid package.
A decade later, under Lula’s rule, Brazil officially became an IMF creditor—not a debtor—after securing the purchase of ten billion dollars in bonds. In other words, Brazil was buying a profitable piece of the debt of the poorer nations of the world. Lula, deploying the swagger that made him formidable when he was on the other side of the barricades, strutted like a peacock and said, “Don’t you think it’s chic for Brazil to lend to the IMF?” He laughed and said that he looked forward to “go[ing] down in history as the president who lent a few reals to the fund.”3 It is difficult to find historical precedent anywhere on earth for Lula’s leadership in Brazil, primarily for what he accomplished and the way he accomplished it. There may be similar leaders, and parts of his social agenda may have found echoes in other places, but the Lula experience has been unique. Lula was a true neoliberal social democrat. He stitched together left-wing and right-wing economic prescriptions to bring millions out of abject poverty, but did little to solve some of the country’s most pressing social problems. And he did so in a context that few—perhaps no—other social-democratic leaders faced in the 2000s: extremely high growth rates and a commodity boom that left the country flush with cash. To know how he and the country arrived at this point, you need to know the man.
Lula was born on October 27, 1945, the seventh of eight children all raised in poverty in Brazil’s impoverished Northeast. When he was seven, his mother moved the whole lot of them to São Paulo, traveling for thirteen days in the back of a flatbed truck. Lula had to leave school in the second grade to work and support his family, but taught himself to read at the age of ten—the beginning of his impressive intellectual life as an autodidact. At nineteen he lost a finger in a factory accident and, according to lore, ran from hospital to hospital, doors slamming in his face. This experience was transformative, spurring him to become involved in union activities, a nine-fingered firebrand determined to improve conditions for workers and fight the antilabor priorities of the military dictatorship.4
No matter where the mythmaking ends and the reality begins, there is no question that Lula’s rise was meteoric. He was elected president of the São Paulo steelworkers’ union at twenty and brashly expanded its numbers, despite organizing under the conditions of a military dictatorship. During this time, young Lula was imprisoned for a month for organizing what the dictatorship’s Labor Courts deemed an illegal strike. In February 1980, he helped found the party that would catapult him to the presidency, the PT (Partido dos Trabalhadores, or Workers’ Party), at age thirty-four. The PT brought together reformists, revolutionaries, trade unionists, socialists, environmentalists, and liberation theologists into an electoral as well as activist political organization. It became home to some of the leading theorists and academics in the country, who attempted to articulate just how Brazil, with all of its natural wealth and radical multiculturalism, had arrived at this point of military dictatorship and economic crisis.5
Lula further built his base in 1983 by launching the CUT (Central Única dos Trabalhadores, or United Workers’ Federation), now the largest union federation not only in Brazil but in all of Latin America, with seven and a half million members. He ran for president unsuccessfully three times before being elected in 2002 in a landslide, with 62 percent of the vote. In that election, Lula received more votes than anyone who had ever run for public office in the history of democratic politics.
When Lula took office, he inherited a country in crisis. Inflation had stabilized, yet more than one-third of the population lived under the UN poverty line—the highest rate of inequality in the world. Argentina had just declared the largest sovereign default in history and Brazil, many predicted, would follow suit. Lula’s immediate agenda was to assure international financial institutions and investors that he was no flaming radical and that Brazil would honor its debts—the very IMF debts he had protested as usurious and immoral. To make sure the international loan sharks were paid, Lula selected a motley crew of economic conservatives and globalists to head his Central Bank and Ministry of Finance. On his orders they went even further than what the IMF demanded, raising interest rates and slashing public spending. He became known as “the IMF’s favorite president.” The Financial Times was so besotted with him it suggested he be named to head up the World Bank.6 It was a bitter pill to swallow for many in the PT and the social movements that had propelled him to power.
By the time Lula left office, the number of Brazilians living in poverty had dropped dramatically. As millions were lifted out of poverty, inequality lessened even as business boomed (according to—disputed—government statistics). During Lula’s tenure, from 2002 to 2010, while many of the world’s economies drooped and the United States poured more than a trillion dollars into its war in Iraq, international capitalists chose Brazil’s stock market as their favorite place to park their currency. Between 2009 and 2011, Brazil vaulted from fifteenth to fourth on the list of countries receiving the most foreign direct investment. In 2011, that figure totaled sixty billion dollars. In 2011, Brazil also surpassed Italy and Great Britain to become the fifth-largest economy on earth.7 Today, three-fifths of Latin American industrial production takes place in Brazil. This is remarkable when you consider that industrialization was not even a tangible reality in the country until 1950.8 São Paulo, all by itself, is now larger and has a higher gross domestic product (GDP) than the next two biggest South American countries, Argentina and Colombia. Brazil now exports more beef than any nation on earth, with Russia its largest single customer.9
In the context of this stunning growth, Lula sought to identify himself as a personification of the Brazilian masses. When he left office, he said, “If I failed, it would be the workers’ class which would be failing; it would be this country’s poor who would be proving they did not have what it takes to rule.”10 As self-serving as that statement is, there is at least an element of truth in it. You cannot understand Lula’s rise from union militant to the highest office in the land without understanding that this was not the triumph of an individual, but the culmination of what historian Perry Anderson calls “the most remarkable trade-union insurgency of the last third of a century”11—the same insurgency that toppled the Brazilian dictatorship in 1985.
And yet, as much as this seemed like a storybook rise of man, economy, and nation, there was a rot beneath the surface, seen most publicly in a series of corruption scandals. With the election of Lula and the PT, many expected that a page had been turned and that organized graft in Brazilian politics would become a thing of the past. Instead, corruption emerged so quickly and virulently that the Lula era almost ended just as it was getting started.
First, in the spring of 2005, José Dirceu, the head of Lula’s cabinet, and Delúbio Soares, the PT treasurer, were caught conducting a “cash for votes” operation, using an illegal slush fund to wire money to the deputies of the smaller parties in Congress.12 Then there was the resignation of Antonio Palocci, a key PT leader, in the spring of 2006. Palocci was running a “party house” near Brasília that operated as a den of prostitution and bribery. Instead of coming down on this with the full weight of the presidency, Lula made a massive effort to keep Palocc
i. In typical Lula style, he compared Palocci to the soccer star Ronaldinho, making the case that, whatever his faults, he was too valuable a player to give up.13 (Lula has never hesitated to use soccer to make his points, whether through metaphor, criticizing certain players, or just wearing the color of his favorite team, Corinthians. Like Vargas before him, he knows that the cultural value of soccer should never be underestimated.) But as further details emerged, Palocci had to step down. He was eventually acquitted by the nation’s Supreme Federal Tribunal—yet this only added to the cynicism about the “new day” Lula had promised. As Anderson detailed:
Of the eleven current members of the tribunal, six of them appointed by Lula, two have been convicted of crimes in lower courts. One . . . made legal history by guaranteeing immunity to a defendant in advance of his trial, but was saved from removal by his peers to “preserve the honor of the court.” Another supported the military coup of 1964, and could not even boast a law degree. A third, on casting a crucial vote to acquit Palocci, was thanked by the president in person for assuring “governability.” . . . Scenes like these, not vestiges of an older oligarchic regime, but part and parcel of the new popular-democratic order, preclude complacency about the prospects ahead, without abrogating them.14
The scandal could have brought Lula down before he even started; many believed that, at the very least, it would cause the PT to get blown out of office in the 2006 elections. They were wrong. Lula won his second election with 61 percent of the vote, roughly the same number as before, although the composition of his voters was poorer and more elderly. Many in the middle classes were pushed away, according to polls, by the corruption scandals and the absence of progress on—this will sound familiar—education and health care.15
In the period prior to the 2006 elections, the Brazilian economy improved dramatically. Credit for this goes less to the austerity programs IMF officials and Economist editors advocated than to the discovery of massive oil deposits and to China’s unprecedented economic growth. No matter who was in office, Brazil would have benefited dramatically from a China desperate for two of Brazil’s most plentiful exports, soy and iron ore. It also became a major buyer of Brazil’s cattle reserves. All of this production for export meant that the country’s average growth in Lula’s first three years as president was 4.3 percent and climbing (compared to just 1.6 percent in the 1990s). With these numbers, Lula was going to win again—and win he did.16
Unlike Venezuela’s Hugo Chávez, who positioned himself as an opponent of unfettered globalization, the PT and Lula were avid participants in free-marketeering and international finance. This paid dividends in the mid-2000s, rocketing the Brazilian economy to unprecedented heights with growth of 8 percent per year. The country was flooded with consumer goods from its new partners in China and East Asia; employment, as well as consumer spending, was on the rise. This also provided the economic basis for Lula’s highly popular social policies aimed at combating economic inequality—the very inequality aggravated by some of his own earlier policies.
Lula may have been the IMF’s “favorite president.” He did not, however, fit easily into the neoliberal mold. Lula emphasized modest social programs. He also insisted on a level of state economic control that would be distasteful to neoliberals in the United States—though, again, his record here is inconsistent at best. But his quest to make Brazil a friendly center for capital investment and a key trading partner for China showed its benefits most sharply when Wall Street crashed in 2008: in Brazil, it was no more than uma marolinha, a ripple.17 Lula said, “Crisis? What crisis? Ask Bush. It’s his crisis.”18 While the United States hemorrhaged half a million jobs per month in early 2009, Lula’s Brazil continued its rapid growth—even US treasury secretary Tim Geithner was praising its economy for leading the world out of a recession.
Lula the fire-breathing radical had become a darling of the Economist and Financial Times crowd, who regularly contrasted his leadership with that of the “irresponsible” Chávez. Many on the left believed that, like so many left-wing Latin American reformers before him, he would at some point have to “face a decisive choice”: either to lead a workers’ struggle for economic justice or to serve the interests of the markets.19 But Lula never had to face that choice while in office.
Negotiating Neoliberalism: Lula’s Foreign Policy
How did Lula do both? How could he feed the ravenous appetites of neoliberalism while raising the living standards of the poor?
To understand this, first we need to talk about what neoliberalism is. In the United States, when we hear the term “liberal,” it’s usually coming from Republicans who are talking about Democrats—a political term that means you lean left but aren’t a radical. The liberalism in “neoliberalism,” on the other hand, is economic liberalism, which describes people who want “free-market” capitalism to rule economic life—meaning (to greatly simplify it) that they want to expand the private sector and shrink the public sector as much as possible. (Translation: sell off the public schools to the highest bidder and start drilling for oil in national parks.) “Corporatist” is probably a better term. The neoliberal philosophy as we know it today was crafted and honed beginning in the 1960s by the economist Milton Friedman and his disciples at the University of Chicago, known collectively as the Chicago School. In the fevered imaginations of its proponents, the workings of the market are a “celestial clockwork”20 that regulates itself perfectly when left alone. As Naomi Klein put it:
Like all fundamentalist faiths, Chicago School economics is, for its true believers, a closed loop. The starting premise is that the free market is a perfect scientific system, one in which individuals, acting on their own self-interested desires, create the maximum benefit for all. It follows ineluctably that if something is wrong within a free-market economy—high inflation or soaring unemployment—it has to be because the market is not truly free. . . . The Chicago solution is always the same: a stricter and more complete application of the fundamentals.21
In practice, the “fundamentals” amount to taking money and power out of the hands of ordinary people and putting them in the hands of the rich, whose “self-interest” creates wealth that Ronald Reagan famously claimed, following Friedman’s advice, would “trickle down” to the rest of us.
The problem, of course, is that the “trickle” promised to workers never does seem to materialize. The wealth stays at the top—and in return, the masses of people are expected to make enormous sacrifices. Neoliberalism’s top priorities include crushing unions, privatizing health care and education, abolishing worker protections like safety rules and the minimum wage, and removing environmental protections—all of which stand in the way of truly “free” trade. In the developing world (and, increasingly, poor areas of rich countries, like the southern United States), neoliberals’ freedom to pursue wealth has them pushing governments to create “free-trade zones,” “promise zones,” and so on—areas with nice names in which bosses get a break from tax and labor laws, so they can run nonunion sweatshops where workers have literally no rights. If anything, the wealth trickles up as services that the wealthy do not depend upon (like public transportation and public education) are eliminated. As Klein points out, “Because of the obvious drawbacks for the vast majority of the population left outside the bubble, other features of the corporatist state tend to include aggressive surveillance . . . , mass incarceration, shrinking civil liberties and often, though not always, torture.”22
As you might imagine, neoliberal economics tend to be pretty unpopular with the electorate. This is especially true in the Global South, where people are well aware that neoliberalism is designed to give international financial institutions, the “great powers,” and particularly the United States the upper hand. Left to their own devices, people tend to vote for things that make their lives better, like sharing wealth and resources and ensuring quality health care and education for all. Nobody wins elections by promising to turn the country into a sweatshop zone. S
o in order to put neoliberal policies in place, the world’s elite need a strategy—some clever sleight of hand to get what they want before anyone can object. Enter the shock doctrine.
The idea is simple: people who are traumatized are more likely to agree to authoritarian measures, to suspending democracy, to doing whatever it takes. The trauma can be unexpected, like a natural disaster or a terrorist attack, or planned, like massive budget cuts or a military coup—anything that
puts the entire population into a state of collective shock. The falling bombs, the bursts of terror, the pounding winds serve to soften up whole societies much as the blaring music and blows in the torture cells soften up prisoners. Like the terrorized prisoner who gives up the names of comrades and renounces his faith, shocked societies often give up the things they would otherwise fiercely protect. . . . After the tsunami, the fishing people in Sri Lanka were supposed to give up their valuable beachfront land to hoteliers. Iraqis, if all had gone according to plan, were supposed to be so shocked and awed that they would give up control of their oil reserves, their state companies and their sovereignty.23
While people are reeling, trying to figure out how to survive, corporations and the corporatist state walk through the open door and take what they please. In New Orleans, in the wake of Hurricane Katrina, the shock doctrine meant that huge swaths of prime real estate went from the hands of poor black residents to rich developers and the public school system was completely gutted.24 After the 9/11 attacks, the shock doctrine allowed the Bush administration to pass a wide-ranging set of laws that restricted civil liberties on an unprecedented scale and created the multibillion-dollar “homeland security” industry. And across the developing world, international financial institutions are key players in implementing the shock doctrine: when an economy falls into crisis, the IMF and World Bank show up prepared to lend enormous sums—if the country agrees to a harsh new regimen of “austerity,” privatization, and neoliberal reforms.