Beginning to Explain the Ferment of Brazil’s Vinegar Revolt

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Last post I briefly questioned why the Vinegar Revolt came to be. Protests still continue, and at one point last week over 80 major Brazilian urban centers coordinated massive marches – in Rio, close to half a million people turned out. These are the largest protests in Brazilian history and they signal a tectonic shift in Brazil’s political culture. It is an unbelievable time to be living in Brazil. Vinegar Revolt near Candalario, Rio de Janeiro

Yesterday my buddy Chris Gaffney, a professor at the Universidade Federal Fluminense in Rio de Janeiro and author of the blog Hunting White Elephants, helped me complete a piece for Al Jazeera that should be coming out within the next few days. I guess many thinkers have been ruminating over the Vinegar Revolt and all at once seemed to fling their ideas into the public realm.

Our Piece – Taxation without Representation or Social Returns

Taxation

My piece with Chris focuses on a crisis of “taxation without representation or social returns”. This is the baseline argument; the ignition for the protests is a direct result of the financial burden placed on average Brazilians — increasing bus fares, hugely wasteful spending on mega-events such as the 2014 World Cup and the 2016 Olympics, inflation’s corrosive effect on purchasing power… pick your grievance.

The financial burden is real. Brazil’s taxes have increased  from around 25 percent of GDP at the beginning of the 1990s, to the current height of 36 percent – the highest in the hemisphere. While the middle class has been growing enormously and now represents approximately 63 percent of the population, so too have taxes, debts, and most recently, inflation. Family debt just broke a new record – 44.3 percent of Brazilian families are now in the red. If you had to pay for private education, private health, private security, and the most expensive cars in the world, you’d be in debt too.

This rate of indebtednes may not seem bad for free-spending Americans, but developed countries such as the US or Canada pay low interest rates and don’t have their salaries eaten up by 7 percent inflation. In Brazil, the benchmark interest rate is 8 percent, and usurious loans and credit cards can double, triple or even quadruple these rates. My credit card (with perfect credit), as I once divulged, charges close to 160% interest per year.

Representation

So that, in part, is the argument. Apparently, it’s not very original.  David Samuels, a stellar Brazilianist scholar from the University of Minnesota wrote this piece that in many ways echoed our own, but was better written and had better numbers (!). Samuels, however, paid little attention to the question of representation, a theme which is also central to our piece. In the article, we stress how parties lack national programs and apart from parties that represent specific interests, e.g. evangelicals, they simply lack ties to the electorate.

As for the PT, successive governments have catered to the lower classes (true need meets easy votes), and have mostly forgotten about the middle classes. I also highlighted the private-regarding nature of parties, who binge at the trough of government largess,blackmailing governments for more positions and pork while weakening meritorious presidential initiatives. The rise of Brazil’s party-aucracy has paralleled the rise in taxes over the last twenty or so years: the number of cabinet ministers has increased from 24 during President Fernando Henrique Cardoso’s second term to the current 37 portfolio positions… you have to pay parties for their support, but the pricetag is higher than anyone can estimate.

Octavio Amorim Neto and the Role of the Opposition

Samuels’ piece was forwarded to me by my friend and colleague at the FGV Rio, Octavio Amorim Neto. I had called him yesterday morning to see what he thought of the Vinegar Revolt. Octavio added a second important explanation: the political opposition in Brazil. Octavio argues that the current opposition is incapable of acting as, well… the opposition. Aecio Neves, the PSDB presidential candidate, is simply too cordial and lacks the skills needed to play the part of a fierce opposition critic. Unions, NGOs, and other advocates have become disconnected from political parties. Without an opposition to represent the voices of the middle class, people took to the streets.

My own reaction is to look to the media. If opposition voices are not being heard, perhaps it’s not the opposition at all, but instead the media’s unwillingness to give the opposition a loudspeaker. Content analyses I performed on countries in Latin America during my dissertation showed that media outlets tended to support presidential initiatives rather than trying to influence the legislative agenda when presidents possessed decisive legislative control. In other words, they would defer to presidents, and provide only modest coverage of critics… Call it a working hypothesis.

Corruption

The key themes above, under-representation and high taxation are good enough reason for revolt. But when you add to the mix incredible public sector corruption and private-public cronyism, to not revolt becomes perplexing. Experts estimate that corruption in Brazil sucks anywhere from 2 to 5 percent of GDP from the country. Based on no evidence, I would peg the number closer to ten percent. The problem with corruption is not the robbery itself — which is bad, of course – but the externalities. If everyone up the chain is feeding the corruption monster, what incentives are there to innovate, economize, perform… pursue a national or local program? Hence poor governance becomes pervasive – inefficiency and incompetence.

Political scientists have noted citizens’ accomodative and passive approach to corruption in Brazil. No more. The giant has awaken – a democratic citizenry. Viva the awakening!

Political Reform

The big promise now is political reform (hasn’t it always been?). In my view, the central objective should be to reduce the number of parties and alter the electoral system. The current system promotes neither an esprit de corps nor programs that priviledge the National Interest.

There are a lot of moving parts here, so I’ll concentrate on just one argument – the problem of delegation. Multiple parties create fragmented coalition politics and acute delegation dilemmas: Dilma has included 7 parties in her cabinet, and as her first year faxina or housecleaning showed, there is good reason for distrust. She delegates very little. Consequently, Brazil gets mono-thematic governments: during Lula, it was Bolsa Familia, during Dilma, it’s a few transparency measures with a little infrastructure poured into the mix. Without delegating, you can only tackle a few priorities at a time. This seems to be exactly what is happening — Brazil is decades behind on infrastructure, education… well, quite a few things.

There will be more to post on these subjects…

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