The Failed Experiment Of European Austerity Comes To Brazil

The Failed Experiment Of European Austerity Comes To Brazil


Brazil has been submitted to the arbitrary rhetoric that imposes austerity as the only way to revive the economy. In order to improve public accounts and restore the competitiveness of the economy by reducing wages and public spending, austerity is based on controversial and even fallacious arguments. The aim to redraw the state’s role to serve vested interests and punish ordinary people. In Brazil, the orthodox economic adjustment, which began under Levy’s management, failed to restore growth and stabilise the public debt, helping to launch the country in the biggest economic setback in decades. As a long term measure, Temer administration proposes to establish a “New Fiscal Regime” by a proposed constitutional amendment (PEC 241) that creates for twenty years a cap on expenditure growth linked to inflation. As the population and GDP grow, public expenditures are frozen.

The European Union set a limit for expenditure growth associated with the growth rate of long-term GDP and not at zero real growth. In most of these countries, there is already a consolidated system for the provision of public services, unlike Brazil where there are much greater social deprivation and precariousness in infrastructure. The ordinary people of Brazil will suffer the full consequences. Perhaps, Temer’s administration aim is to revert the 70% of people that come out of extreme poverty in the last 14 years. Other expenses such as Bolsa Família (Social benefit) and infrastructure investment will need to shrink from 8% to 4% of GDP in 10 years and 3% in these twenty years, which will compromise the functioning of public administration and financing of basic state activities. Austerity is a mechanism that takes the resources from the many given it to the few. Austerity is a trojan horse to ordinary people dressed in empty slogans where they have their rights and pockets picked apart. There are current case studies that Austerity has not worked in the UK, in Greece and in many parts of Europe. The PEC 241 has been Proposed Constitutional Amendment 241, also called PEC Spending Ceiling, aims to limit spending on health, education, welfare and Social Security for the next twenty years.

It is an arbitrary attack on ordinary people because as noted by the Finance Minister, Henrique Meirelles, the PEC 241 will be limiting spending on health and education, which are currently linked to the evolution of federal revenues. How can an unelected administration justify such burden over the people? And what if Brazil economy starts growing in five years time will the austerity plan remain? It is idiotic to suggest twenty years of austerity the UK only managed about six to seven years. It is merely passing the public goods cheaply to the hands of private investors such as the Petrobras. It is defunding heavily on education and on health care. It is estimated that if the PEC 241 was running in 2014 the investment in education would be R$30,3 million instead of the R$102,4 million.

It has been pointed out that Austerity and deficit reduction are being used as a cover-story for conducting class war against the poor. The SUS (The Brazilian equivalent to the NHS) will be privatised. The minimum wage would drop from the current R$ 880 to R$ 550 per month. The plan is for in twenty years only the elite to have a University degree. The class war in Brazil is more evident because the Casa Grande and Senzala relationship and Brazil’s elite later on due to come back to need IMF lending and it will be once again under IMF control. Perhaps the Brazilian football team crest could be also sold and where the CBF to IMF where we could charge reduction fee over our interest. In the large sense, I have to disagree with Bakunin, one thing austerity rhetoric has suggested is that when the people are being beaten with a stick, they are much happier if the media call it the People’s Democratic Stick.