Saad Filho: The attack on Lula and threats to Brasil’s Democracy 

Speech at SOAS, University of London, April 12, 2018

Transcribed and edited for readability by Brasil Wire

Luiz Inacio Lula da Silva was the most influential trade union leader in Brazil in the 1970s and the most important leader of what was known as the new unions, that emerged under the military dictatorship, centered on the durable consumer goods industries that had been building in the previous 20 years, and in the state owned enterprises and the state sector. Between the late 1970s and the early 1980s, Lula led some of the largest and most influential workers strikes in Brazilian history. He was also the leading founder and then president of the Brazilian Workers Party, the PT,  in the early 1980s. Interestingly and despite the dominant media discourse and image back then as well as now Lula was never a socialist of any description. He was always a social democrat, always a trade unionist and always a negotiator.  And he is impressively good at reaching agreements across economic and political divides and this has been essential for his later trajectory.

As the main leader of the PT Lula fought and lost three presidential elections in 1989, 1994 and 1998. Each time the PT fought a more moderate campaign, trying to appeal more and more to the political center and to the middle class. By the time of the elections in 2002, Lula and the PT put together a very broad coalition, including formal sector workers in the lower sectors of the civil service that was the traditional base of support of the PT, plus chunks of the middle class and a large chunk of the internal bourgeoisie  that is a fraction of capital that is not very closely connected to finance or international capital and they were represented in that program by Vice President José Alencar, a leader of the textile industry and a politician of the center right – a nationalist. During 2002 Lula was rising in the opinion polls and that created a lot of turbulence in the exchange rate and the market for the domestic public debt. This led Lula to create a document that became known as the Letter to the Brazilian People, four months before the election. The letter essentially committed his administration to maintaining neoliberal economic policies, those policies that had been imposed by then President Fernando Henrique Cardoso of the PSDB, the main rival of the PT back then as well as now.  The letter was effective. Lula was elected and he appointed as President of the Central Bank a very prominent international banker and member of the PSDB, Henrique Mierelles, who would then become Minister of Finance after the coup – the Minister of Finance under Michel Temer – but this was all in the very distant future. In appointing Mierelles, Lula was trying to negotiate an agreement with finance, with international capital and with the Brazilian elite.  He would not change macroeconomic policy but he wanted to be able to do some social policies, he wanted to be able to distribute income at the margin, he wanted to be able to reduce poverty. This is what Lula’s first administration tried to do until reality interfered in two ways.

First they discovered that neoliberal macroeconomic policies, fiscal austerity, high interest rates, inflation targets and an independent central bank, free international flows of capital, and so on, are incompatible with rapid economic growth. You just can’t have growth with these policies.

Second, they also discovered that in Brazil political moderation does not bring peace because the problem for the PT was not that the government failed to deliver growth in the beginning of the 2000s, Cardoso also failed and of course Michel Temer is failing right now. Growth is not a problem for the political right in Brazil. The problem was that the mainstream media, the judiciary, the upper middle class and the financial elite resented their dislocation from the State and from the inner circle of power and they decided to destroy Lula. And to do this, in 2005 they invented the Mensalão scandal, a story about the PT paying a monthly stipend for Deputies and Senators to vote for the government in Congress. And this was never proven. But the scandals started and it showed that it can be very difficult to prove that you did not do something, especially if it didn’t happen but the media and the courts are determined to show that you did it. The Mensalão tarnished the image of the PT, nearly led to Lula’s impeachment and destroyed Finance Minister Antonio Palocci and José Dirceu, the chief strategist of the PT and other party leaders as well. Lula managed to recover only because of his support among the poor and among the industrial elite in the country.

He was reelected in 2006, and then proceeded to implement much bolder, much more interesting economic policies in line with this new base of support. He was also very very fortunate because Brazil was riding on a global prosperity brought by the commodities boom in the early and mid 2000s.  The economy was growing faster and the government had money, money to raise the minimum wage to raise pensions, to raise transfers and benefits to implement more ambitious social policies, to introduce bolder industrial policies  and to support what they called “the National Champions”, a selected group of large companies that would be following the example of Japanese and South Korean conglomerates and then drive growth, innovation and exports. These were firms like Petrobras in oil, Odebrecht in construction, JBS in foods, OI in telecoms and etc. It is no coincidence these are exactly the firms that the Lava Jato investigation and the coup against the PT have been trying to destroy.  The policies implemented by the second Lula administration were successful and Brazil saw very significant improvements in employment creation formalization of labor, distribution of income, education and social indicators. Lula’s popularity rose to unprecedented levels and when he stepped down from the presidency in 2010 his approval ratings were above 80%. He was the most popular politician in republican history in Brazil.

Dilma Rousseff, Lula’s chosen successor, was not so fortunate. The World economy had been in crisis since 2008 and Brazil was hit heavily from 2011. Dilma Rousseff could not keep the economy going and she could not keep her coalition together. The government essentially collapsed.  The story of the PT administrations was that under favorable economic conditions and under favorable political circumstances they could deliver a virtuous circle of growth with political stability and gains in distribution. But those administrations were limited. They were limited in five ways.

The first is that they were attached to neoliberal policies and this was made to guarantee credibility with capital, but credibility is not a symbolic attribute. Credibility in this case is a consequence of the limitations that neoliberal policies impose against distribution of income and against social inclusion. When Lula and Dilma tried to change those policies the media and the economic elite turned against them.

Second, the moment was limited because high interest rates and a currency that was valued too high meant that any income growth at home would leak abroad in the form of higher imports. The consequence was deindustrialization in Brazil, the loss of jobs, the re-primorization of the economy and the growth of agribusiness at the expense of industry. The economy created millions of jobs but they were bad jobs and those jobs did not correspond to the demands of the middle class and they did not correspond to the aspirations of the rising working class that was now, because of Lula’s policies, going to university. There were no jobs for them.

Third, lack of investment and weak industrial policy contributed to a productivity gap that was intractable in the country and the government was unable to upgrade the infrastructure.  They were unable to catch up with the advanced Western economies, then they were unable to keep up with the rising East Asian economies, then they were unable to accompany China.  Brazil is now locked underneath all these countries in the international division of labor and for this reason alone there is no prospect of sustained economic growth in the country for the coming years, maybe the next generation.

Fourth, the economy suffered because of the deterioration of the global economic environment after the crisis and the impact of quantitative easing in the advanced economies. Brazil simply did not have a way to neutralize that. If you are locked underneath much larger, much richer and much more dynamic economies you get all the weight of their adjustments and you can’t adjust yourself.

Finally, the PT was committed to political stability but stability depended on the ability of the administrations led by the PT to deliver economic gains to almost everyone, which was possible only in times of global prosperity.

Eventually policy mistakes, an adverse global environment, the economic slowdown, the strength of the opposition  and a succession of corruption scandals- all of them planned and organized – paralyzed the government.  Dilma Rousseff was overwhelmed by what I like to call an alliance of privilege, including the social groups at the top of society, and she was overthrown by a civilian judicial coup in 2016. Since then, the administration, led by Michel Temer, has been restoring orthodox neoliberalism through severe fiscal contraction, a huge attack on labor and a dismantling of the skeletal welfare state that exists in Brazil.  The income and employment gains that had been achieved under the PT have evaporated by now. Also worrying is that the far right has recovered a mass base in the country for the first time since the early 1960s. Despite all this and perhaps because of it, Lula remains the most popular politician in Brazil. He leads all the opinion polls as a potential candidate for the presidential elections scheduled for this October so preventing his election has become the priority for the coup now, and the priority for several judges and public prosecutors and the almost entire mainstream media in the country.  So we find now that Lula is a political prisoner in Brazil and Lula must be supported and he must be defended because of who is he is and because of what he means for Brazil.

In contrast with most people in Michel Temer’s inner circle including Temer himself, Lula was never caught with stolen money, he was never caught with illegal bank accounts, he was never proven guilty of corruption or anything else. He’s not a rich man. He was never caught on tape suggesting that somebody should be killed.  All this is on Temer and his friends. Lula is innocent of all that. His crime was to be a worker and a political leader in an elitist country. His crime was to be popular in a country of awful politicians. His crime was to be an outsider from the elites who had governed the country for 500 years and because of that Lula and Dilma were presumed guilty and were punished despite the absence of proof while politicians in power now are innocent despite the evidence of guilt.

What is happening in Brazil is scandalous. It is scandalous to politicize justice in this way. It is scandalous to have the US government guiding policy and the judicial prosecution of Lula. It is scandalous to have the judicial process turned into a spectacle for TV.  It is scandalous to invite the military back into politics. Brazil is rolling back to the 1950s now.  The conspiracy of the elite has turned Brazil into a banana republic.  The challenge now is the challenge to confront the coup. The challenge is to rebuild a democratic movement that will clean up the political system, that will clean up the judiciary, that will reform the media, that will put the media, the judicial system and the State at the service of political freedom, at the service of legal equality and at the service of substantive democracy. This is the challenge that we have to confront now.


By Alfredo Saad Filho

Alfredo has degrees in Economics from the Universities of Brasilia (Brazil) and London (SOAS). He has worked in universities and research institutions based in Brazil, Canada, Japan, Mozambique, Switzerland and the UK, and was a senior economic affairs officer at the United Nations Conference on Trade and Development (UNCTAD). His research interests include the political economy of development, industrial policy, neoliberalism, alternative economic policies, Latin American political and economic development, inflation and stabilisation, and the labour theory of value and its applications.