The Successor
by Fernando Henrique Cardoso

Published in O Estado de São Paulo, September 5, 2004
Link back to: Ted Goertzel's Brazil Page

Two weeks ago I went to San Francisco for the annual meetings of the American Sociological Association (ASA).  In the 1980's I was president of the International Sociological Association and I attended many such meetings until my political obligations no longer allowed this kind of activity.

Now, as ex-President, I am once again free to participate in academic meetings.

The invitation was attractive.  The President of the ASA, Michael Burowoy, my colleague in 1982 in the Department of Sociology at Berkeley, is making an admirable effort to arouse the interest of the American academic community in questions of public interest.  I thought my sociological observations on the experience of being President of Brazil would be useful.

But, as the Americans say, "there is no free lunch."  Before the honorary session I had the challenge of dialoging with Paul Krugman about the future of neoliberalism before an audience of more than three thousand people.  My views on the topic were much the same as Krugman's.  I thought, but did not say, that sociologists interested in public debate should be more concerned about the triumph of neo-conservatism in the United States (of the neocons, who are acting as the ideologues of the current government) than with liberalism.

But this did not happen.  One only has to see how resistance to free trade is increasing in American public opinion, and how the American state intervenes more and more to benefit large businesses, how it is increasing the restrictions on individual liberty in the name of security, etc.  A smaller state is emerging (taxes are cut) with a more conservative politics.

After the dialogue came the questions from the audience and, unavoidably, the needling one, "You, were `accused' of leading a neoliberal government. Do you not think that President Lula is doing the same thing?"

I said that Lula's government could be considered a successor of mine because it is acting responsibly in the economic area, even though I did not care much for this necessary inheritance. But I added that neither my government nor the current Brazilian government can be characterized as "neoliberal." The fact that the Lula government is following the solid economic foundation which I left for managing government spending by respecting the Fiscal Solidarity Law, maintaining a fluctuating exchange rate and having targets for controlling inflation, does not mean that it is neoliberal.

In some respects the current government is quite different from mine.  It is different in its treatment of culture, on the question of liberty of information, in the functioning of regulatory agencies, in the form of partnerships between the public and private sectors. That is to say, it differs in its conception of the relationships between state and society and in its approach to administering the public sector.   But these differences do not mean that the Lula government is less neoliberal nor that the previous government was more so.

In both governments, but more so in mine, public spending in the social area expanded.  In the previous government it increased from 11% to 14% of the Gross National Product.

This increase in spending permitted us to create a "social protection network," with school scholarships, programs to combat child labor, food scholarships, and so on. We also settled more than 500,000 families on farms, created lines of credit for family agriculture, and so on.  These policies established the basis which allows the current government to continue, and, God willing, even expand social programs to reduce poverty, changing only the names of the programs. They may also choose to continue the partnership with civil society instead of increasing the bureaucratic mechanisms of the state.

With respect to the fundamental principles that govern the market economy, neither government proposed to eliminate or diminish the action of the state.  Certainly neither of them believed that the market is the only or the major principle for regulating economic action and assuring public well-being.

The price for confronting the fiscal crisis and the resulting debts, given the limitations of the market economy and the need for public spending, has been a more or less continual increase in taxes.  This is a difficult price, because it limits the economic vigor of the country. But it has to be paid because of the distortions generated by inflation before the Real Plan and by the fiscal indiscipline associated with it.

We may question how much fiscal burden can be supported, or what interest rates the Central Bank should impose to control inflation. It is fair to question whether it would have been better to devalue the real [sooner than we did in 1999].  Those who do not understand the rigors of political and economic life will always protest that leaders "lacked the courage" to make better decisions.  The most malicious will say that not devaluating the real was an electoral strategy, and so on. This is a simplistic effort to blame the governments of the past for the difficulties of the present.  I could easily have used this kind of argument to "blame" my predecessors.  I never did so, because being neither foolish nor malicious, I know that there is more between heaven and earth than loose rhetoric.

Like it or not, the current government is the beneficiary of a period in which society and government learned to take control of inflation. It is the beneficiary of a floating exchange system that, in 1999, freed us from the straight-jacket of exchange rigidity without which inflation would not have disappeared. It is the beneficiary of a Law of Fiscal Responsibility and of the privatization of the state banks, changes which prevent the development of autonomous centers of inflationary spending that could undermine the policies of the federal government.  And it is important to emphasize that we freed ourselves of these problems, with sacrifices and errors, but while maintaining a solid industrial and agricultural economy, an economy capable of producing for both internal and export markets. We followed policies of promotion of investment and innovation, such as Moderfrota the Embrapa programs, to cite only two examples.  These policies led to gains in productivity, thanks to fiscal stabilization and the valorization of the currency, which made importing equipment less expensive.

The important thing today is to avoid backsliding which can be difficult to perceive at first, as is occurring with the Law of Fiscal Responsibility. We must continue to strengthen clear administrative rules to guide the development process. The risk is not of "neoliberalism." The risk is the inclination to increase the size of the state apparatus and to go back to an anachronistic economic and political dirigisme that would retard development.

Translated by Ted Goertzel.