Brazil: Extractive Capitalism and the Great Leap Backward

Abstract: This article examines Brazil's economic, social and environmental policy under neoliberal and center-left regimes, and finds substantial continuities in promoting an extractive economic development strategy. The devastating impacts on the Amazon, and the continuation in class inequalities counter the reformist imagery of the Workers' Party regime. The study emphasizes the utility of class analysis in deconstructing ideological identities.Key words: neoliberalism; extractive capitalism; class struggleIntroductionBrazil has witnessed one of the world's most striking socio-economic reversals in modern history: from a dynamic nationalist-industrializing economy to a primary export economy. Between the mid-1930s and the mid-1980s, Brazil averaged nearly 10 percent growth in its manufacturing sector, largely based on state inter- ventionist policies, subsidizing, protecting and regulating the growth of national public and private enterprises. Changes in the "balance" between national and foreign (imperial) capital began to take place following the military coup of 1964 and accelerated after the return of electoral politics in the mid-1980s. The election of neoliberal politicians, especially with the election of the Cardoso regime in the mid-1990s, had a devastating impact on the strategic sectors of the national economy: wholesale privatization was accompanied by the denationalization of the major banks and corporations and the deregulation of capital markets (Petras and Vettmeyer 2003, Chapter 2). Cardoso's regime set the stage for the massive flow of foreign capital into the agro-mineral, finance, insurance and real estate sectors. The rise in interest rates as demanded by the IMF and World Bank and the speculative market in real estate raised the costs of industrial production. Cardoso's lowered tariffs ended industrial subsidies and opened the door to industrial imports. These neoliberal policies led to the relative and absolute decline of industrial production (Petras and Vettmeyer 2003: Chapter 1).The Presidential victory of the self-styled "Workers' Party" in 2002 deepened and expanded the "great reversal" promoted by its neoliberal predecessors. Brazil reverted to becoming a primary commodity exporter, as soya, cattle, iron and metals exports multiplied and textile, transport and manufacturing exports declined (Petras 2005: Chapter 1). Brazil became one of the leading extractive commodity exporters in the world. Brazil's dependence on commodity exports was aided and abetted by the massive entry and penetration of imperial multi-national corporations (MNCs) and financial flows by overseas banks. Overseas markets and foreign banks became the driving force of extractive growth and industrial demise.To gain a better understanding of Brazil's "great reversion" from a dynamic nationalist-industrializing economy to a vulnerable imperial driven agro-mineral extractive dependency, we need to briefly review the political economy of Brazil over the past 50 years to identify the decisive "turning points" and the centrality of political and class struggle.Military Model: Modernization from AboveUnder the military dictatorships (1964-84) economic policy was based on a hybrid strategy emphasizing a triple alliance of state, foreign and national private capital focused primarily on industrial exports and secondarily on agricultural commodities (especially traditional products such as coffee) (Evans 1979).The military discarded the nationalist-populist model based on state industries and peasant cooperatives of the ousted leftist President Goulart and put in place an alliance of industrial capitalists and agro-business. Riding a wave of expanding global markets and benefiting from the repression of labor, the compression of wages and salaries, comprehensive subsidies and protectionist policies, the economy grew by double digits from the late 1960s to the mid-1970s, the so-called "Brazilian Miracle" (Serra 1973). …