What can South Africa learn from Lula's Brazil?

A Lula Moment for South Africa?

Lessons from Brazil

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A LULA MOMENT FOR SOUTH AFRICA?

LESSONS FROM BRAZIL

Edited by Edward Webster and Karen Hurt

A Lula Moment for South Africa? Lessons from Brazil

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The Chris Hani Institute5th Floor, Cosatu House110 Jorissen StreetCnr Simmonds StreetBraamfontein 2017Johannesburg, South Africa

Tel: +27 (11) 339 3040Fax: +27 (11) 339 3041www.chi.org.za

First published in 2014 © The Chris Hani Institute (publication) 2014

© Ruy Braga, Neil Coleman, Adam Habib, Jay Naidoo, Joel Netshitenzhe, Giorgio Romano Schutte, Gay Seidman, Robert van Niekerk, Edward Webster

ISBN 9780620589741

Copy editor: Diane StuartCover: Interior hut, Sabalele village, Eastern Cape, birthplace of Chris Hani. Photo: Nic Eppel, 2013 Picture research, layout and design: Leah Marais

Printed and bound in South Africa

The !"#$%&'()$&*)%+$+,+-&$%&(&).)/#.0+&.#1()$%(+$.)Registration number: 2008/024034/08

All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without prior written permission of both the copyright holder and the publisher of the book.

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Acknowledgements iv Acronyms vi

Preface: The Lula Moment: A Question of Leadership and Integrity 1Jay Naidoo

Introduction 7Edward Webster

Brazilian section

Chapter 1: Brazil: 10 Years of a Workers’ Party Government 15Giorgio Romano SchuttePostscript: And then there was the June Movement

Chapter 2: Brazil: Limits of a Precarious Development Model 33Ruy Braga

Chapter 3: New Citizenship Rights for the Poor 39Gay Seidman

South African section

Chapter 4: Social Democracy and the ANC: Back to the Future? 47Robert van Niekerk

Chapter 5: A Lula Moment for South Africa: Searching for Sugar Man? 61Joel Netshitenzhe

Chapter 6: It Can Be Done 67Adam Habib

Chapter 7: What Can South Africa Learn from Lula’s Brazil? A Cosatu Perspective 81Neil Coleman

Index 103

CONTENTS


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ACKNOWLEDGEMENTS

This collection of essays began as a roundtable discussion on 7 February 2013. Both the roundtable and this publication

would not have been possible without the generous support of the Friedrich Ebert Stiftung 2.,+"&34#$5(&6405-7&()8&$+%&4.#9-#&8$#-5+.#7&3:-;&Schmidt. I would like to thank the participants for

agreeing to rework their presentations for publication; and Neil Coleman, strategies coordinator for Cosatu, for writing the concluding chapter. Anthea Metcalfe, project manager of the Chris

Hani Institute, was central to the success of the roundtable. Zwelizima Vavi, general secretary of Cosatu, has been the inspiration for the idea of a Lula Moment for South Africa, and I would like to thank him for his support for this project. A special thanks to Gay Seidman, who as a young 1#(8,(+-&%+,8-)+&%.9-&<=&>-(#%&(1.7&0#%+&8#-?&my attention to the parallels between the labour movements of Brazil and South Africa. Editing this collection of essays was a

demanding exercise and it would not have been possible without the professionalism and dedication of my coeditor, Karen Hurt. She put together an outstanding team: Leah Marais who took responsibility for the photographs, design and index; Diane Stuart who undertook the copy editing, and Anthea Metcalfe who provided overall support to the project.

Edward WebsterDirector, Chris Hani Institute

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BRAZIL SOUTH AFRICA

Luiz Inácio Lula da Silva Photo: Agência Brasil

Nelson Mandela Photo: Graeme Williams

Cape Town Photo: Graeme Williams

Rio de Janeiro Photo: Graeme Williams

2010 World Cup, Nelson Mandela Bay Stadium

Photo: Wikimedia Commons

2014 Brazil World Cup, Maracanã Stadium, Rio de Janeiro

Photo: Wikimedia Commons

Apartheid Museum Photo: Wikimedia Commons

National Congress of Brazil, Brasilia. Photo: Mario Roberto

Duran Ortiz, Wikimedia Commons

Khutsong service delivery protests, Johannesburg, 2012

Photo: William Matlala

Popular resistance at Pinheirinho, São Paulo, 2012. Photo: http://

ultraultrapassado.wordpress.com


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ACRONYMS

ANC African National Congress BEE Black Economic Empowerment BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brazilian national development bank)CEPAL United Nations Economic Commission for Latin America CGIL General Confederation of LabourCHI Chris Hani Institute Codesa Conference for a Democratic South Africa Cosatu Congress of South African Trade Unions CUT Central Única dos Trabalhadores DBSA Development Bank of Southern Africa DFI Development Finance Institutions FDI Foreign Direct InvestmentFHC Fernando Henrique Cardoso FTSE Financial Times and the London Stock Exchange GAIN Global Alliance for Improved Nutrition GDP Gross Domestic Product Gear Growth Employment and Redistribution GNU Government of National Unity IBOPE Brazilian Institute of Public Opinion and Statistics IDC Industrial Development Corporation ILO International Labour Organization IMF International Monetary Fund IPEA Institute for Applied Economic Research (Brazilian government’s economic research institute)ISER Institute of Social and Economic Research ITU International Telecommunications Union KMU Kilusang Mayo Uno MPL Movimento Passe Livre (Brazilian youth movement)MST Landless People’s Movement NDP National Development PlanNedlac National Economic Development and Labour Council Nepad New Partnership for Africa’s DevelopmentNGO NonGovernmental OrganisationNHI National Health Insurance NP National Party OECD Organisation for Economic Cooperation and Development PAC Programa de Aceleração do Crescimento (Brazil’s growth acceleration programme)PCdB Communist Party of Brazil PDP Política de Desenvolvimento Produtiva (package of productive development industrial policies)PMDB Partido do Movimento Democrático Brasileiro PSB Brazilian Socialist Party PSDB Partido da Social Democracia Brasileira PSOL Party for Socialism and Liberty PT Partido dos Trabalhadores (the Workers’ Party)RDP Reconstruction and Development Programme SACP South African Communist Party SOE StateOwned EnterpriseTJLP Taxa de Juros de Longo Prazo (longterm interest rate)UNCTAD United Nations Conference on Trade and Development UNE União Nacional dos Estudantes @)-%5.& & @)$+-8&A(+$.)%&B8,5(+$.)(;7&25$-)+$05&()8&!,;+,#(;&6#1()$C(+$.)&WTO World Trade Organization

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PREFACE

THE LULA MOMENT: A QUESTION OF LEADERSHIP AND INTEGRITY

Jay Naidoo

Cosatu march against privatisation of South African industries, Johanesburg, 30 August 2001. Photo: William Matlala


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The biggest legacy of my presidency is not the programs that took 40 million Brazilians out of absolute poverty and created 15

million jobs. It is the accountability of the public institutions and real partnership with business, labour and civil society that brought hope to the /-./;-D&E-&/,+&+"-&)--8%&.4&+"-&/-./;-&0#%+D&A.+&ours.1

F,;(&?(%&#-G-5+$)1&.)&"$%&/#-%$8-)5>7&"(H$)1&I,%+&recovered from cancer. His punishing schedule did not seem to matter – he was on a whirlwind tour across Africa. I met Lula with my son Kami. He patiently answered the questions of a 19year.;8D&J"$%&$%&F,;(K%&8-0)$)1&5"(#(5+-#$%+$5L&"$%&ability to listen with attentiveness; a quality he shares with Mandela. Lula continued to say:

I was not the president. The people were the president. The foundation of the ‘Brazilian Miracle’ is not mine. It is that of the people. If I failed my people who elected me, it would be the people failing, and the poor would be proving their critics right that we did not have what it takes to rule.

I think back to 1990. Mandela had been released. Political organisations, including the African National Congress (ANC) and South African Communist Party (SACP), were unbanned. Political prisoners were released from apartheid jails and our comrades were returning from exile. It was a turbulent period. The transition was violent, as shadowy rightwing groups tried desperately to reverse the momentum to change. Our time was spent strengthening our defences. The Congress of South African Trade Unions

(Cosatu) was the backbone of the internal mass democratic movement. Thousands of our shop stewards were deployed to build ANC and SACP branches. Many of our national leaders were deployed into the ANCled Convention for a Democratic South Africa (Codesa) negotiations process. These were challenging times.Our debates were robust. We grappled with our

role in the transition. The goal of our struggle to win a nonracial, nonsexist democracy was within sight. Should Cosatu be represented independently

1 See Times Live, The Big Read ‘Let’s learn from Brazil’ by Jay A($8..&M<N&A.H-9O-#&<PQ<RS&0#%+&/,O;$%"-8&$)&+"-&Daily Maverick <www.dailymaverick.co.za>. Subsequent quotes are from Jay Naidoo’s various interactions over the years with former Brazilian president, Luiz Inácio Lula da Silva (Lula).

in the political negotiations? What was the new Tripartite Alliance’s programme, into which I led Cosatu, as an independent organisation? How could we ensure we did not go the route of other liberation struggles that turned on their own?We had triumphed over apartheid. But we were

not yet clear of the precipice of a racial civil war. However, central in our minds was the nature and content of the postapartheid democracy. We had to learn more about societies in transition. Brazil was at the top of our mind. We followed the emergence of the Partido dos Trabalhadores (PT) – the Workers’ Party – under Lula, founded $)&QTUP7&()8&O.#)&.,+&.4&0-#5-&?.#V-#&O(++;-%&()8&opposition to the military dictatorship. The core focus of the PT and its alliance with

the Brazilian Central Única dos Trabalhadores (CUT) – the national labour federation, founded in 1983 – was a commitment to democratic modern socialism. It was a rejection of the +#(8$+$.)(;&;-(8-#%&.4&.405$(;&,)$.)$%9&()8&8>$)1&political models of the Stalinist era.

Cut from the same clothCUT and Cosatu were for all intents and purposes cut from the same cloth of militant social movement unionism, based on a strong streak of independence from the political parties with which they were in alliance.With the help of the leftleaning Italian

General Confederation of Labour (CGIL), we (##()1-8&+"-&0#%+&8$%5,%%$.)%&O-+?--)&!@J7&Cosatu and CGIL in 1991. The idea of SouthSouth solidarity had long occupied our minds. The international union movement had been dominated by conservative unions on both sides of the ‘Cold War’ union divide. That is ?">&!.%(+,&#-I-5+-8&(40;$(+$.)&+.&()>&.4&+"-&international trade union federations. We worked closely with our comrades in national federations across Scandinavia, Netherlands, Australia and Canada; and with individual unions in the major western trading partners. In my mind the unions of the socialist

countries tended to be mere conveyor belts of the party elite. We sought out ideological allies in the developing world, like CUT in Brazil, the Nigerian Labour Congress, and the Kilusang Mayo Uno (KMU) (also called the May First Labour Movement) in the Philippines. Our aim was to build a new alignment to engage the

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centralised power of unions in the North. But more $9/.#+()+&?(%&(&1.(;&+.&8-0)-&(&)-?&1#.?+"&()8&development paradigm that would put the interests of workers and the poor at the centre stage. 6,#&0#%+&9--+$)1&?(%&%,55-%%4,;D&E-&

agreed to broaden the focus and to include more of the militant trade unions of the South. The relationship continued to strengthen and CUT/CGIL had a second round of talks in South 34#$5(D&E-&?-#-&5.99$++-8&+.&0)8$)1&;$V-W9$)8-8&allies in both the developing and developed world. Some of our earliest ideas around the Reconstruction and Development Programme (RDP) came from our interactions with comrades in Brazil.

A Mandela Moment meetingBut the tumultuous events of transition intervened and at the 1993 Cosatu Congress, I was elected to lead 20 union leaders onto an ANC ticket for +"-&0#%+&8-9.5#(+$5&election. In 1994, newly appointed to the Mandela cabinet, I received a frantic call from Sergio Xavier Ferreira, a CUT 5.9#(8-&()8&F,;(K%&.405$(;&+#()%;(+.#D&'-&%($8&the South African foreign affairs bureaucracy had cancelled a scheduled meeting with President Mandela. Relenting to pressure, a private meeting was allowed and Mandela and Lula had a passionate conversation that overshot the scheduled time.

To the horror of the apparatchiks in our foreign .405-7&X()8-;(&/#.5--8-8&?$+"&F,;(&+.&(&9--+$)1&with the media. Mandela believed that the core of our foreign policy should be the unquestionable commitment to human rights and international solidarity. He also showed a deep appreciation of social movements that emerged outside of the traditional liberation fold. He embraced their independence, passion and honesty.

!"#$%&'($()*+,+-./(.+0,1-$)+234&'.$choicesOver the years I have interacted regularly with F,;(&()8&"(H-&#-G-5+-8&.)&?"(+&+"-&Lula Moment meant. The challenges of his 0#%+&+-#9&?-#-&+#-9-)8.,%D&Y(5-8&?$+"&">/-#W$)G(+$.)7&()&unfriendly bureaucracy and a suspicious military, +"-&F,;(&(89$)$%+#(+$.)&4(5-8&8$405,;+&5".$5-%D&The Workers’ Party, led by Lula, only represented 17% of the members of a fragmented and chaotic Congress, dominated by powerful vested interests that would more often than not oppose his policies. Lula recognised the need to stabilise the

macroeconomic environment through a set of pragmatic policies. He did it through transparent 8$(;.1,-&Z&-H-)&?$+"&"$%&0-#5-%+&5#$+$5%D&F,;(&was the opposite of the ‘big man’ syndrome of political arrogance that dominates so many governments. He surrounded himself with many competent people. He crisscrossed the country;

Cosatu, CGIL and CUT workshop at Cosatu House, Johannesburg, 16 September 1993. Photo: William Matlala

The Lula Moment: A Question of Leadership and Integrity


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engaged the landless movements, trade unions, civil society and social movements. Brazil’s diverse population had been divided

for centuries. That very divide spurred a militant activism and several social movements. Lula himself rose through the ranks as a militant labour leader in the 1980s. The clashes between the landless movements and the oligarchic landowner class, the militancy of unions under the military dictatorships; and the interracial challenges were (;;&(&%$1)$05()+&#-(%.)&+.&O,$;8&+#,%+&+"#.,1"&transparency and meaningful public participation.

The Zero Hunger programmeLula’s 0#%+&+-#9&?(%&8-0)-8&O>&+"-&;(,)5"&.4&the Zero Hunger programme. Its commitment was that every Brazilian family should have a meal three times a day. His childhood of poverty 8-0)-8&F,;(K%&9-9.#$-%L

J"-&0#%+&+$9-&*&(+-&O#-(8&?(%&(+&[&>-(#%&.;8D&E-&lived on cassava. My parents were penniless. In government I asked my ministers how the laws, policies and actions they proposed would contribute to eradicating hunger.

Personal experience drove Lula’s singleminded focus to enable the poor to create pathways out of poverty. The Zero Hunger programme covers over 12 million families, a quarter of Brazil’s population of 190 million. It provides conditional direct cash transfers to reduce shortterm poverty. And it places an obligation on parents to make sure that their children are in school and are vaccinated. Breaking the intergenerational cycle of poverty became the hallmark of the Lula presidency.But the longterm goal was to improve human

5(/(O$;$+$-%D&F,;(7&"$9%-;4&+"-&0#%+&/#-%$8-)+&.4&Brazil without a university degree, is convinced that the right to quality education and social inclusion are the most important tools for building a globally competitive economy for any country. He prides himself on being the president who created the most universities and technical schools. By tackling poverty, improving skills and

investing in education, the government was critical in accelerating the rise of the poorest to decent jobs and the middle class. Lula believes that:

We must succeed in creating a class of entrepreneurs who can create their own livelihoods and drive job creation.

South Africa on the other hand has failed generations of our youth. Our education system has not created pathways out of poverty for the 9(I.#$+>&.4&>.,+"D&6405$(;&1.H-#)9-)+&%+(+$%+$5%&point out that more than half the pupils who leave after 12 years of schooling have very few skills, no jobs, and are unlikely to have a job in their lifetime. Lula recognised that China had established

itself as the factory of the world; and India as the technology capital of the world. Brazil aimed to be the farm of the world. Special credit lines were extended to small farmers, who account for 70% of the food production (and create more jobs and value per hectare). An entire industry grew around producing tractors for small farmers. Access +.&%--87&0)()5-7&?(+-#7&;()8&()8&4-#+$;$%-#&?(%&facilitated.

Lula speaks during a metalworkers general strike after his release from prison, Vila Euclides Stadium, São Paulo, 1980.

Lula addresses people on subsidised housing and Bolsa Família credits, Diadema, 2005. Photo: Ricardo Stuckert

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Lula lobbied Congress to pass a bill to oblige local governments to buy at least 30% of the family farmers’ produce. He linked it to the government’s school feeding programmes. This boosted family incomes and gave them vital access to markets. The immediate impact was improvement in children’s health, education and nutrition. The trade unions negotiated a special

programme with state banks for responsible borrowing against pay cheques. This cut out the unscrupulous moneylenders – millions of workers were able to avoid the debt trap. For +"-&0#%+&+$9-7&5.,)+;-%%&\#(C$;$()%&%(?&"./-&()8&opportunity materialise, and consumption grew as lifestyles improved. Lula personally attended national conferences

of representatives of grassroots organisations. He listened to their pleas, frustrations and hopes. They felt that he was one of them; he stood with them and demonstrated empathy with their plight. He worked ceaselessly to reduce the social distance between the government and the vast majority of Brazilians.

Lula’s second termF,;(K%&%-5.)8&+-#9&?(%&8-0)-8&O>&$+%&G(1%"$/&programme, the Programa de Aceleração do Crescimento (PAC) or the Growth Acceleration Programme. This project of over US$ 350 billion aimed to remove barriers to growth, and drive social and urban infrastructure. The leading role of the Banco Nacional de Desenvolvimento Econômico e Social (BNDES), the Brazilian national development bank, and other parastatal corporations was critical. They took the risks that drove an industrial and infrastructure strategy, which opened up new sectors and ‘crowded in’ private capital. In 2011, the BNDES disbursed close to US$ 100 billion.As chairperson of the Development Bank of

Southern Africa (DBSA) between 2000 and 2010, I met the leaders of the BNDES and attempted to forge a closer working relationship. I could see the pivotal role the Brazilian development bank played in catapulting Brazil to become the sixth largest economy in the world. It:

]& ,);.5V-8&/#$H(+-&5(/$+(;&+"#.,1"&$)).H(+$H-&public private partnerships

]& $9/#.H-8&-5.).9$5&5.9/-+$+$H-)-%%

]& 0)()5-8&;(#1-W%5(;-&$)8,%+#$(;&8-H-;./9-)+]& O,$;+&5(/$+(;&9(#V-+%&]& /#.9.+-8&%9(;;&()8&9-8$,9&-)+-#/#$%-%D

While Lula was proud to have overtaken industrialised countries like the United Kingdom, "-&^,(;$0-8&$+&O>&%(>$)1L

We cannot just focus on GDP growth. It has to be sustainable and socially inclusive. Otherwise it leads to rising inequality and with it social instability. Then the people have a right to rise up and condemn their government.

Competent managers had to be appointed to successfully harness the levers of state power. A clear division of responsibility between government and these entities in terms of corporate governance had to be ensured. While there has been corruption in the government, the heads of the state companies I met were of high ethical and performancedriven culture and standard. Undoubtedly many of the appointments to top positions were politically motivated, but merit and competency were a precondition.Having visited Brazil several times, I am

struck by one special thing in conversations I have often had with ordinary people: taxi drivers, hotel staff, youths in the streets, activists working in the favelas, business tycoons, and ministers in government. It is the overwhelming sense of hope in spite of the challenges they still face in a country almost four times the population of South Africa.Lula is certainly not a saint, as he points out

he has made mistakes. There are very legitimate criticisms around his failure to implement a more radical agrarian reform programme; and not being tougher on corruption that implicated senior Workers’ Party comrades. While the newsrooms and analysts still

relentlessly probe his every move, he believes passionately in the independence of the media and freedom of speech:

The right of the people to express themselves is why we fought against the military dictatorship. We must never compromise that basic human right.

This is something our own South African lawmakers in parliament ignored by passing the secrecy laws, which have now been referred back to parliament.

The Lula Moment: A Question of Leadership and Integrity


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Listening to the voices from BrazilAs I listen to the instructive voices from Brazil, I understand what it takes to be a servant leader. 2,5"&(&;-(8-#&$%&.)-&?".&,)$0-%&(&)(+$.)S&;$%+-)%&to the voices of the marginalised, and consciously lowers the toxicity in public debates while still maintaining robustness. It is a return to the spirit of service, reconstruction and development that inspired our nation at birth, guided by our oath of sovereignty to deliver a better life to all our people. It is our obligation to deliver on the human rights and dignity that we fought for and that are today enshrined in our Constitution.That is a prerequisite for any possibility for

our very own Lula Moment to occur. The steps (#-&).+&8$405,;+L&?-&)--8&+.&9(V-&%,#-&?-&9(V-&transparency our starting point and priority; then make a social contract that will establish trust between business, government and unions.

What South Africa requiresThe lessons we need to learn from our own history of struggle is to recognise that unmet expectations, especially amongst our youth, is the biggest threat to social stability. Our own Moment requires visionary leadership, integrity, and a commitment to meet the needs of our people. It means having a strategy and plan with performancedriven timeframes. It means making +.,1"&8-5$%$.)%&+.&0#-&$)5.9/-+-)+&()8&5.##,/+&/,O;$5&.405$(;%D&Only then will the lonely and forgotten

majority in our country sense hope. And only then will the best and brightest among us rise to serve our nation. What we need most of all is a revolution of ethics, humility and morality in our country. !

Left to right: Sergio Xavier Ferreira, close comrade and former !"#$%&#'()*+,-.$)/012%-,)("-'$,-(/"3)Kami Naidoo Pagé, Lula, and Jay Naidoo. Photos: Courtesy Jay Naidoo

Jay Naidoo was founding Cosatu general secretary and served three terms (1985 to 1993). From 1994 to 1999, he was the minister responsible for

South Africa’s RDP and communications minister in Nelson Mandela’s cabinet. He served as the chair of the DBSA, a major !"#$%&'$()'($*+,"%")!"-+.*/*0123*"'+institution, headquartered in South Africa, from 2000 to 2010. Currently he is chair of the Global Alliance for Improved Nutrition (GAIN), a global foundation committed to addressing malnutrition facing two billion people in the world. He also serves in an advisory capacity for a number of international organisations including the Broadband Commission of the International Telecommunications Union (ITU) and the 4"!'*.+5%'!1"&+6.()%'!1"%07+8)!*"'!,)+%".+Cultural Organization (UNESCO); and serves on the Board of the Mo Ibrahim Foundation, which focuses on improving governance in Africa. Jay publishes a blog at www.jaynaidoo.org

Jay Naidoo with Brazilian comrades at the Cosatu Congress, Johannesburg, 1993.

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INTRODUCTION

Edward Webster

Workers on strike for a living wage, Johannesburg, March 2011. Photo: William Matlala

Vila Euclides Stadium, São Paulo, Brazil, 25 May 1980.


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As the Chris Hani Institute (CHI), we are interested in exploring feasible alternatives to the failure of the neoliberal

macroeconomic strategy to deliver on the critical challenges facing our country. In doing so, we believe we are being true to the legacy of Chris Hani who, in an interview with Luli Callinicos, eight days before he was assassinated in April 1993, said:

The 3A!&?$;;&"(H-&+.&01"+&(&)-?&-)-9>D&J"(+&enemy would be another struggle to make freedom and democracy worthwhile to ordinary South Africans. Our biggest enemy would be what we 8.&$)&+"-&0-;8&.4&%.5$.-5.).9$5&#-%+#,5+,#$)1D&Creation of jobs. Building of houses, schools, medical facilities, overhauling our education, eliminating illiteracy, building a society which 5(#-%7&()8&01"+$)1&5.##,/+$.)&()8&9.H$)1&$)+.&+"-&gravy train of using power, government position to enrich individuals. We must build a different culture in this country, different from Africa, different from the Nationalist Party. And that culture should be one of service to people.1

Twentythree years ago, at the dawn of South Africa’s democracy, the Congress of South African Trade Unions (Cosatu) began to look for partners from the Global South. The idea of SouthSouth solidarity had long interested Cosatu. The international union movement, they felt, was dominated by conservative unions on both sides of the ‘Cold War’ union divide. Unions in the socialist countries tended to be mere conveyor belts of the party elite. As Jay Naidoo, general secretary of Cosatu at

the time, argues in the Preface to this collection of essays: ‘We sought out ideological allies in the developing world, like CUT (the Brazilian Central Única dos Trabalhadores) in Brazil’ (Naidoo, 2014:2). At the centre of the left project in Brazil was the Partido dos Trabalhadores (PT) – the Workers’ Party – and its leader, Luiz Inácio Lula da Silva. Following a similar trajectory, scholars over the

last two decades have shown increasing interest in comparing Brazil and South Africa. Historically, the two countries display striking similarities: they share similar settler colonial histories and legacies

1 Chris Hani, interviewed on 23 and 31 March 1993 by Luli Callinicos, at the South African Communist Party (23!_R&.405-%7&`$%%$V&2+#--+7&a."())-%O,#1D

of sharp racialised inequality; and they have an authoritarian past. In both countries workingclass movements challenged authoritarian rule in the 1970s and 1980s. Historically, in both countries, small elites

O-)-0+-8&4#.9&-5.).9$5&1#.?+"7&?"$;-&?.#V-#%&and their families were excluded from their country’s wealth. After decades of authoritarian industrialisation, democratic governments came into power in the early 1990s in Brazil and South Africa. In both cases, militant labour played a crucial role in the transition to democracy. In South Africa we had the victory of a national liberation movement, the African National Congress (ANC). In Brazil, the victory went to Fernando Henrique Cardoso, and later to the Workers’ Party under Luiz Inácio Lula da Silva. Today in both countries, democraticallyelected governments seek new inclusive growth paths. Like South Africa, Brazil has undergone

a remarkable transformation. Five successful democratic presidential elections mark the longest span of democratic governance in Brazilian history. The country proudly claims a seat at global discussions as an important voice for the developing world. International observers across the political spectrum have been impressed by Brazil’s economic expansion. Brazil certainly O-)-0+-8&4#.9&+"-&1;.O(;&5.99.8$+>&O..97&which supported a decade of steadily increasing agricultural and mineral exports. National economic growth rates averaged about 5% a year from 1990 to 2008. Foreign investment and employment soared, reducing unemployment to 7.4% by 2008.

Lula addresses a high-level conference on food security and South-South cooperation, Brasilia, 2010. Photo: ifad-un.blogspot.com

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Introduction

Brazil’s growth has been marked by dramatic new strides toward social inclusion. Given Brazil’s longstanding status as one of the world’s most unequal societies, the growth of the past decade has also been marked by a steady decline in inequality. While all Brazilians have seen their incomes rise, the incomes of the poorest households have risen much faster than those at the top. New government programmes raised households

out of poverty, wages have been increased and minimum wages enforced, and new governmentbacked programmes have expanded credit for lowerincome households. This has effectively expanded Brazil’s domestic market, created demand for locallymade goods, and provided an economic cushion during the 2008 crisis. Increasingly,

international observers have suggested that there may be lessons in Brazil’s recent growth, offering an alternative that links growth to improved living conditions for all. As senior International Labour Organization (ILO) economists Janine Berg and Stephen Tobin (2011) conclude:

Experiences of Brazil serve as an important case study in how income policies can play a critical role in mitigating economic downturn, and how, rather than jeopardizing economic growth, they can drive economic recovery.

What can South Africa learn from Brazil? Faced by the ANC’s commitment to a more radical second phase of transition, Cosatu’s general secretary Zwelinzima Vavi opened the 2012 Cosatu Congress with a challenge to President Zuma: Can South Africa drive its own Lula Moment? The chapters in this collection of essays are the

outcome of a CHI roundtable discussion on what 2.,+"&34#$5(&5()&;-(#)&4#.9&+"-&+-#9%&.4&.405-&of Luiz Inácio Lula da Silva, president of Brazil from 2003 to 2010. We titled the roundtable: ‘A Lula Moment

in South Africa? Lessons from Brazil’. Held on 7 February 2013, the workshop was a direct response to Cosatu’s championing Brazil’s successful incomeled growth as an alternative to the Washington Consensus. In a comprehensive Political Report to the

2012 Cosatu Congress, Vavi argued that:

At the heart of the gains in [Brazil’s] labour market, is the consolidation of national minimum wages and collective bargaining, with a deliberate strategy driven by progressive governments, to substantially increase the real level of minimum wages, and

address the plight of the working poor. The other key leg of this strategy to raise people’s incomes is the introduction of social protection measures to ensure that all the poor, including unemployed, have access to basic income. These redistributive policies have been effectively combined with statedriven industrial and

investment strategies (Cosatu, 2012).

But Vavi’s endorsement of Brazil’s incomeled growth path was a cautious one:

These major advances in Brazil don’t mean that it has solved its fundamental problems. It remains a capitalist society, with high levels of inequality, poverty, violence and landlessness (Cosatu, 2012).

Cosatu’s invocation of Lula’s success is a pragmatic one. ‘If workers in Brazil can do it, so can we,’ Vavi remarked at the roundtable. After all, Lula’s roots lie in the working class and he rose to become the leader of the powerful metalworkers union. As the chapters in this collection of essays

suggest, Lula achieved this transformation in people’s lives by:

Cosatu public sector unions march against privatisation in parastatal organisations, Johannesburg, 29 March 1990. Photo: William Matlala


10

]& 5#-(+$)1&9.#-&()8&O-++-#&I.O%]& $)5#-(%$)1&+"-&/#./.#+$.)&.4&4.#9(;&&employment

]& ,)$.)%&8-4-)8$)1&(&8-H-;./9-)+&9.8-;&+"(+&distributes income

]& #-8,5$)1&$)-^,(;$+>&]& -)%,#$)1&$9/#.H-8&;(O.,#&;(?&5.9/;$()5-&?"$;-&contributing to increased formality (Cosatu, 2012:3–4).

In Chapter 1, Giorgio Romano Schutte, a %/-5$(;&(8H$%-#&$)&F,;(K%&/#-%$8-)+$(;&.405-&4#.9&2006 to 2009 and professor of economics and international relations at the Universidade Federal do ABC (UFABC) in Brazil, describes how Lula’s party came to power facing real challenges. A 5"(;;-)1-&+.&)(+$.)(;&()8&$)+-#)(+$.)(;&0)()5$(;&9(#V-+%&?.,;8&"(H-&#$%V-8&5(/$+(;&G$1"+7&?"$5"&would have destabilised Brazil’s economy. Lula’s Workers’ Party lacked a clear majority in Congress. Lula’s 0#%+&+-#9&.4&.405-&%(?&(&9$:&.4&

heterodox macroeconomic policies emphasising 0%5(;&%+(O$;$+>&.)&+"-&.)-&"()87&()8&$)).H(+$H-&social policies and modest redistributive policies on the other. In 2005, this strategy was nearly derailed by a political scandal, which surrounded ‘undeclared transfers’ by the Workers’ Party to members of parliament to pay their electoral campaign debts – and to ensure their support on key policy votes. But as Schutte argues:

No evidence was ever put forward that money was channelled to members of the PT leadership for their personal gain, except for the general secretary. He accepted a Land Rover as a gift and ?(%&-:/-;;-8&4#.9&+"-&/(#+>7&(%&?(%&+"-&0)()5$(;&secretary because of lack of transparency in the transactions (Schutte, 2014:18).

In his %-5.)8&+-#9&.4&.405-&M<PP[&+.&<PQPR7&Lula embarked on what Schutte terms a ‘neodevelopmentalist approach’, which moved away from the Washington Consensus; it increased the minimum wage and promoted policies that favoured job creation. The trigger for this ‘virtuous cycle’ was the expansion of credit fuelled by an increase in commodity prices. But the real change came about, Schutte argues, through the dynamics provoked in the internal market, putting in place a virtuous cycle: increased incomes and credit for poor and lower middleclass households created new demand for

locallyproduced consumer goods, which in turn spurred more economic growth and more jobs. While Schutte emphasises Lula’s policy

innovation in his second term, Gay Seidman, the Martindale Bascom professor of Sociology at the University of WisconsinMadison, USA, writing in Chapter 3, suggests that Lula’s success also built on some innovations introduced by the Cardoso government in the 1990s – especially its emphasis on both macroeconomic stability and greatly improved tax collection. Above all, however, Seidman emphasises

the way Lula’s government created a social safety net for Brazil’s poor households. They did this mainly by raising and enforcing minimum wages and expanding pension programmes for retired workers, especially in rural areas. ‘Most importantly,’ Seidman suggests:

Brazil has: ]& 8#(9(+$5(;;>&$)5#-(%-8&+"-&#-(;&H(;,-&.4&+"-&country’s legal minimum wage

]& $)5#-(%-8&+"-&H(;,-&.4&/-)%$.)%&+.&.;8-#&Brazilians, especially for poor rural workers who had long been excluded from formal pension schemes

]& 9.H-8&9()>&9.#-&?.#V-#%&4#.9&/#-5(#$.,%&or temporary status into formallyregulated employment contracts (Seidman, 2014:42).

Further, she suggests, increased funding for Brazil’s labour department has strengthened labour law enforcement in ways that have improved both workers’ conditions and small enterprises’ productivity. She quotes Brazilian labour expert Roberto Pires, who concluded:

Bolsa Familia !"/4/(#$)-22#$$)(/)1'-'2%-,)$#"5%2#$)0/"),/67%'2/4#)people. Photo: Bruno Spada/MDS

11

Introduction

When the labour department works well with business and unions, compliance raises wages, ensures better health and safety for workers, and can also improve the sustainability of businesses. J"$%&$%&O-5(,%-&$)%/-5+.#%&5()&"-;/&-9/;.>-#%&0)8&new strategies to improve productivity (Seidman, 2014:44).

Is the Lula Moment still alive in Brazil? Joel Netshitenzhe, director of the Mapungubwe *)%+$+,+-&4.#&2+#(+-1$5&`-G-5+$.)&MX*2J`3R&()8&a long standing member of the national executive committee (NEC) of the ANC, asks in Chapter 5 whether the Lula Moment will continue past Lula’s presidency, which ended in 2010. Evoking the enchanting documentary Searching for Sugar Man, Netshitenzhe suggests that the Lula Moment was precisely that: ‘a passing moment incapable of sustaining itself’ (Netshitenzhe, 2014:65). Ruy Braga, an associate professor at the

Department of Sociology, University of São Paulo (USP), similarly questions the notion of a Lula Moment in Chapter 2. Describing conditions for workers in São Paulo’s call centres, Braga points to the limits of a ‘precarious development model based on cheap and unskilled labour’. He argues that, ‘the current development model has created access to social rights at the cost of low wages and precarious working conditions’ (Braga, 2014:37).

In February 2013, Braga’s presentation seemed rather pessimistic. But only four months later his critique of the Brazilian developmental model proved to be prescient. Millions of Brazilians, including many young workers drawn from relatively educated but poorly paid industries such as call centres, took to the streets in June and July. While Brazil’s 2013 street protests were

triggered by increases in public bus and train fares, the protests soon took on a range of amorphous issues and diverse groups of social actors, including sections of the middle class. As two astute observers put it:

The dissatisfaction is quite real: urban transportation, health care provision, and public education are in shambles. Despite the progress of recent years, there is a sense that things are not as good as they should be – that more of the /./,;(+$.)&%".,;8&O-)-0+&4#.9&/#.%/-#$+>&()8&growth, that services should be better, and that regular citizens are left out of decisions that matter to them (Teixeira and Baiocchi, 2013:2).

J"-&-:/()%$.)&.4&5$+$C-)%"$/&"(%&O-)-0++-8&+"-&H-#>&/..#&5#-(+$)1&(&%.5$(;&G..#D&\,+&.+"-#&observers agree with Braga that by dramatically expanding university education, the Workers’ Party may have raised expectations further: the middle class wants more (SaadFilho, 2013).

Brazilian urban farmer. Photo: www.marketplace.org


12

Whether Lula’s successor, the more technocratic and less charismatic President Dilma Rousseff, can win over the middle classes and push for progressive policy change remains to be seen. What is clear is that the massive expenditure on state of the art football stadiums for the 2014 FIFA World Cup in Brazil is fuelling a sense of disillusionment and giving rise to demands for improved public services for all Brazilians.

Possibilities of an incomeled and inclusive growth in South Africa There are, of course, important differences between Brazil and South Africa. These range from the key differences in employment rates and economic structure, to differences in the democratic transition. While both countries depend on commodity exports – whose price slump has contributed to recent slowdowns $)&O.+"&-5.).9$-%&Z&\#(C$;K%&-:/.#+%&#-G-5+&a more varied mix of agroexports, minerals and industrial goods. Brazil’s expanding agroexport and biofuels sectors in particular seem to generate new employment. This is in contrast to the relatively slow growth in jobs in South Africa’s mining sector. Further, Brazil’s much larger population means that its small and mediumsized enterprises can look to a potential

domestic market for locally produced consumer goods, especially as poor households see their incomes rising. There are also important differences between

the histories and internal dynamics of the two countries’ political parties, even though both are committed to inclusive growth. While both countries went through democratic transitions at the same time, the ANC was swept into power in 2.,+"&34#$5(K%&0#%+&8-9.5#(+$5&election. Having been denied access to political position under apartheid, few ANC leaders had experience in governing before their party became the country’s majority power. In contrast, the Workers’ Party had participated in local elections for more than 20 years before Lula gained the presidency. Many Workers’ Party activists served in local and provincial administrations where they developed experience in policy design and implementation. But as participants at the CHI roundtable noted, South African policymakers can look to their own traditions in developing inclusive policy approaches. In a fascinating contribution in Chapter 4,

Robert van Niekerk, director of the Institute of Economic and Social Research (ISER) at Rhodes University, suggests that social democratic policies lie at the heart of the ANC from its roots in the 1940s to the Reconstruction and

Protesters on Congresso Nacional, ‘The House of the People’ in Brasília, 17 June 2013. Photo: Valter Campanato/ABr

13

Introduction

Development Programme (RDP) in the 1990s. However he suggests that these inclusive approaches, ‘were severely undermined by the neoliberal ideology that pervaded many ANC policies in the post1994 election period’ (Van Niekerk, 2014:48).These ideas are resurfacing today, however,

in social policy proposals to establish a national health service, a plan which Van Niekerk suggests:

reconnects with the ANC’s ‘strategy of equality’ in that it seeks to create a national health service that is universally available to all citizens regardless of class, race and colour; one that is based on crossclass social solidarity. The NHI would not be based on an insurance model; it will be predominately tax funded. The values and principles underpinning the NHI proposal – universalism and social solidarity – are those of the classic social democratic welfare state (Van Niekerk, 2014:59).

Writing in Chapter 6, Adam Habib, vicechancellor of the University of Witwatersrand, believes economic and social transformation can be accomplished:

without compromising the goals of democratisation, empowerment and inclusive development… [however] this agenda involves two distinct tasks: (i) conditioning political elites to become more

accountable and responsive to the concerns of 5$+$C-)%S&()8&M$$R&4,;0;;$)1&+"-&.H-#(;;&.OI-5+$H-%&.4&the Constitution when the provisions of different 5;(,%-%&5.9-&$)+.&5.)G$5+&?$+"&-(5"&.+"-#&M'(O$O7&2014:68).

Drawing on Gramsci’s notion of a ‘war of position’, Habib argues for three core elements of an alternative progressive political agenda:

the pursuit of electoral reform, facilitating the emergence of a viable parliamentary opposition and the critical independence of the union movement, and encouraging the emergence of an independent and plural civil society (Habib, 2014:74).

Recognising that a country like South Africa is likely to experience tensions as it balances broad social goals – for example, as it seeks both economic growth and inclusive development – Habib calls in his chapter for ‘a new social pact to be cemented between business, labour and the state’ (Habib, 2014:75) to promote a new kind of inclusive growth. Is such a pact feasible? Neil Coleman, in the

last chapter of this collection of essays, ends on a cautiously optimistic note:

South Africa does have space to forge its own Lula Moment in terms of socioeconomic transformation. But the window is rapidly closing. The ruling

Mining in South Africa. Photo: Graeme Williams


14

alliance and the labour movement need leadership to forge a national platform for development. This would include a programme of mass participation and mobilisation; action to transform state institutions in line with our developmental vision; and a clear proposal to engage elements of business that make up the real economy to forge a true national development compact (Coleman, 2014: 101).

John Saul draws a useful distinction between ‘structural reform’ and ‘mere reformism’. He $8-)+$0-%&+?.&V->&(++#$O,+-%&.4&+"-&;(++-#&V$)8&.4&b#-4.#9KD&J"-&0#%+&;$-%&$)&"$%&$)%$%+-)5-&+"(+&any reform, to be ‘structural’, must not be comfortably contained but must, instead, be part of ‘an emerging and ongoing project of structural transformation in a coherently leftward direction’. Secondly, it ‘must root itself in popular initiatives in such a way as to leave a residue of further empowerment’ (Saul, 2011:94). I believe that the socioeconomic changes that

have taken place in postapartheid South Africa have taken us well beyond ‘mere reformism’: whether a path of ‘structural reform’ is possible remains to be seen. What is clear is that the world has a lot to learn from Lula’s Brazil on how to invest in the wellbeing of the poor while pragmatically pursuing macroeconomic growth and stability. We hope that this collection of essays contributes to this challenge. !

Acknowledgement I would like to thank Gay Seidman for her assistance with this Introduction and the conceptualisation of this collection of essays.

References

Berg, J. and Tobin, S. (2011) ‘Incomeled growth as a crisis response: lessons from Brazil’. The Global Crisis: Causes, Responses and Challenges. Geneva: ILO.

Coleman, N. (2014) ‘What can South Africa learn from Lula’s Brazil? A Cosatu perspective’. A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

Cosatu. (2012) Political Report. Johannesburg: Cosatu.

Habib, A. (2014) ‘It can be done’. A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

Naidoo, J. (2014) ‘The Lula Moment: A Question of Leadership and Integrity’. A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

Netshitenzhe, J. (2014) ‘A Lula Moment for South Africa: searching for Sugar Man?’ A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

SaadFilho, A. (2013) ‘The mass protests in Brazil in June/July, 2013’. The Bullet: Socialist Project EBulletin 857 (15 July).

Saul, J. (2011) Liberation Lite: The Roots of Recolonization in Southern Africa. New Delhi: Three Essays Collective.

Schutte, G.R. (2014) ‘Brazil: 10 years of a Workers’ Party government’. A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

Seidman, G. (2014) ‘New citizenship rights for the poor’. A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

Teixeira, A.C. and Baiocchi, G. (2013) ‘Who speaks for Brazil’s streets?’ Boston Review (31 July).

Van Niekerk, R. (2014) ‘Social democracy and the African National Congress: back to the future?’ A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

Edward Webster is research professor in the Society, Work and Development Institute (SWOP) at the University of the Witwatersrand; and director of the Chris Hani Institute. He is

editor-in-chief of the Global Labour Journal, and coordinates a range of research projects on the world of work. Among his publications are Grounding Globalisation: Labour in the Age of Insecurity, written with Rob Lambert and Andries Bezuidenhout, which won the American Sociological Association Award for the best book on labour in 2008.

15

89#):-"-%$/!/,%$)0-5#,-);:-"-&%$#)<%(=)$9-'(=)(/6'>)?/"&#"$)(9#)-0@+#'()&%$("%2()/0)A/#4-)%')BC/):-+,/3)D"-E%,3)FGGHI):9/(/J)8+2-)K%#%"-

CHAPTER 1

BRAZIL: 10 YEARS OF A WORKERS’ PARTY GOVERNMENT

Giorgio Romano Schutte


16

On 1 January 2003 a former metalworker born in the poor northeast – like many of 2c.&_(,;.K%&?.#V-#%&Z&+(V-%&.405-&(%&

president of Brazil. That same month Luiz Inácio Lula da Silva becomes the only president to speak at the World Social Forum in Porto Alegre and at the World Economic Forum in Davos. He has the %(9-&9-%%(1-&(+&O.+"&4.#,9%L&?-&)--8&+.&01"+&hunger and poverty. *+&?(%&+"-&0#%+&+$9-&(&?.#V$)1W5;(%%&;-(8-#&

"(8&O-5.9-&/#-%$8-)+S&()8&+"-&0#%+&+$9-&\#(C$;K%&Partido dos Trabalhadores (PT) – Workers’ Party – won the presidential elections. Prior to this, the PT had only gained experience at local government level.Lula understood the quote misattributed to the

saint of the poor Francis of Assisi, ‘Lord, grant me strength to change the things I can, the serenity to deal with the things I cannot change, and the wisdom to know the difference’. However, by changing the things you can, new strength is given; new power relations develop and what yesterday needed the serenity to accept might become possible to change tomorrow. This chapter offers an overview of the debate

around the PT government’s record in economic /.;$5>D&*+&$8-)+$0-%&4.,#&/-#$.8%L&1. 2002: the context facing Lula before taking .405-

2. First mandate 2003–2006: mixed feelings3. Second mandate 2007–2010: the golden years4. 2011–2012: President Dilma Rousseff’s two years of government.

2002: the context facing Lula before .(5+,6$0234#US intellectual Noam Chomsky referred to the existence of a ‘virtual senate’ to describe 9.O$;-&0)()5$(;&5(/$+(;K%&/.?-#&+.&%-+&;$9$+%&+"(+&governments must accept if they want to retain stability. For example, a proposed law is subject to approval by both the real and virtual senate. The virtual senate has its own way of voting. It 5()&/#.9/+&5(/$+(;&G$1"+&.#&#($%-&b5.,)+#>&#$%VK&9(V$)1&+"-&#-0)()5$)1&.4&+"-&/,O;$5&8-O(+-&9.#-&expensive. This is what happened in 2002. J"-&-;-5+$.)%&?-#-&"-;8&.)&+"-&0#%+&()8&;(%+&

Sundays of October. The possibility of Lula ?$))$)1&+"-&-;-5+$.)%&"(8&(;#-(8>&$)G,-)5-8&+"-&behaviour of the markets since mid2002:

]& 5.,)+#>&#$%V&?-)+&,/&4#.9&TNd&O(%$5&/.$)+%&$)&December 2001 to 1,460 in December 2002

]& 5(/$+(;&G$1"+&-:/#-%%-8&$+%-;4&$)&()&$)5#-(%-&in the exchange rate; in December 2001 the US dollar (USD) stood at 2,32 Brazilian real (BRL); and in December 2002 at 3,53

]& O-+?--)&e-5-9O-#&<PPQ&()8&e-5-9O-#&<PP<&)-+&5(/$+(;&G.?%&8#.//-8&4#.9&@2f&<[&O$;;$.)&to US$ 8 billion.

If Lula intended to begin transformation by an attack on the privileges of capital and the upper middle classes it was clear that the vested interests would not use 20th century solutions like the United States of America (USA) did in 1973 in Chile. The USA backed the military coup, which violently stopped the popular democratic government of Salvador Allende. The message to F,;(&$)&+"-&9.)+"%&O-4.#-&"-&+..V&.405-&?(%&H-#>&clear. Lula’s government would be destabilised O>&5(/$+(;&G$1"+&()8&O.>5.++&.4&$)H-%+9-)+%D&'-&#($%-8&+"-&?"$+-&G(1&(&5.,/;-&.4&?--V%&O-4.#-&the elections with a public declaration called ‘Message to the Brazilian People’. It was actually ($9-8&(+&+"-&)(+$.)(;&()8&$)+-#)(+$.)(;&0)()5$(;&markets. The declaration committed Lula and the PT to respect all contracts. Another important domestic context facing

Lula was the lack of a clear majority in Congress. In the second round Lula got 61% of the votes. But the coalition that launched him as presidential candidate – the PT, the Communist Party of Brazil (PCdB), and the Brazilian Socialist Party (PSB) – only got 26%. Only a quarter of Congress stood behind real social transformation. There was no way to govern without making deals with conservative and opportunist members of Congress.

PT victory, 2003. Photo: Ricardo Stuckert

17

Brazil: 10 Years of a Workers’ Party Government

Last, but not least, the social and political situation in Brazil in 2002 and 2003 was not of a revolutionary scene of workers mobilising for radical change. The option to mobilise popular classes against the resistance for social change from the majority of the two congresses did not exist. The Sunday evening after the announcement of Lula’s victory saw tens of thousands celebrating, not millions. The vote for Lula was above all a vote against the failure of neoliberal policies, which had not delivered on its promises. @)8-#&)-.;$O-#(;&/.;$5$-%&$)G(+$.)&?(%&/,+&

under control. But unemployment was high; so ?(%&+"-&+#(8-&8-05$+7&()8&+"-#-&?(%&()&$)5#-(%$)1&public debt. Deregulation and liberalisation had created an extremely vulnerable reality. The 0)()5$(;&5#$%-%&.4&+"-&%-5.)8&"(;4&.4&+"-&QTTP%7&starting with the Tequila Crisis in Mexico, followed by Thailand and other Asian countries; Russia in 1998; and Argentina and Brazil, had demonstrated how quickly capital moves around.

First mandate 2003–2006: mixed feelingsJ"-&0#%+&F,;(&(89$)$%+#(+$.)&8-5$8-8&).+&+.&5.)4#.)+&9(#V-+&4.#5-%&()8&0#%+&1-+&+"-&9(5#.-5.).9$5&01,#-%&#$1"+D&J"-&central bank started to increase already recordhigh basic $)+-#-%+&#(+-%&M#-(5"$)1&<dDdgR&$)&+"-&0#%+&9.)+"%&of 2003. The PT leadership had discussed this strategy, but it was not always understood by the party’s militants. Many got confused, and a minority left the PT to form a new leftwing party called the Party for Socialism and Liberty (PSOL). They felt that the basic pillars of macroeconomic policies would not be changed. 6)-&.4&+"-&0#%+&".+&$%%,-%7&O-%$8-%&+"-&$)5#-(%-&

in basic interest rates, was a modest reform in pension rights, which was considered to be too liberalmarket oriented. The majority however %".?-8&5.)08-)5-&+"(+&F,;(&"(8&).+&1$H-)&,/&+"-&01"+&4.#&%.5$(;&5"()1-D&

New initiatives beginIn many areas not related directly to macroeconomic policy new initiatives were taking place. For example, the administration set up a ministry for racial equality. This broke with Brazil’s mainstream tradition, which denied the existence of structural lack of opportunities 4.#&+"-&O;(5V&/./,;(+$.)D&2>9O.;$5(;;>7&+"-&0#%+&law sanctioned by President Lula in January 2003 made teaching of AfroBrazilian history mandatory. Around half the population is AfroBrazilian yet teachers were not familiar with their history and hardly any educational materials were available.

Other initiatives These included:]& (&%,O%+()+$(;&$)5#-(%-&$)&5#-8$+&4.#&%9(;;W".;8&farmers

]& #-%+#,5+,#-8&%.5$(;&+#()%4-#%7&1$H$)1&;$1"+&+.&the social welfare programme called Bolsa Familia&Z&+"$%&O-5(9-&F,;(K%&G(1%"$/&%.5$(;&policy to eradicate extreme poverty

]& (&5;-(#&4.#-$1)&/.;$5>&5"()1-&4#.9&+"-&%+(#+&with the focus on SouthSouth relations, and a new more proactive relationship with the USA; Lula strongly advocated against the Bush administration’s invading Iraq – he set up a coalition called G20 in the World Trade Organization (WTO) negotiation round in Cancun (2003), the objective was to challenge the Organisation for Economic Cooperation and Development’s (OECD) domination

]& (&)(+$.)?$8-&/.;$5>&+.&(;;.?&4.#&%.5$(;&participation in local conferences that led to national conferences to formulate policy /#./.%(;%&4.#&%/-5$05&(#-(%D&

These are just some examples to demonstrate that much progressive and innovative policy was developed from the start – except at the ministry .4&0)()5-S&()8&-H-)&;-%%&(+&+"-&5-)+#(;&O()VD&J"-%-&?-#-&0#9;>&8.9$)(+-8&O>&H-%+-8&$)+-#-%+%7&especially those linked to the 0)()5$(;&%-5+.#D&J",%&+"-&0#%+&9()8(+-&%(?&(&9$:+,#-&.4&

Lula made teaching of Afro-Brazilian history in schools mandatory in 2003. Photo: Passarinho/Pref.Olinda, Wikimedia Commons


18

orthodox macroeconomics on the one hand and innovative social policies and modest redistributive policies on the other.

2005: a political scandal breaks In 2005, however, political discussion was dominated by a scandal that directly involved the _J&;-(8-#%"$/&()8&V->&01,#-%&$)&+"-&1.H-#)9-)+D&*)&X(>7&+"-&0#%+&$)8$5(+$.)&.4&(&%5"-9-&+.&0)()5-&5.(;$+$.)&/(#+$-%&O-5(9-&/,O;$5D&J"-&_J&admitted they organised loans to pay for MP’s 2002 election campaign debts through undeclared transfers. No evidence was ever put forward that money

was channelled to members of the PT’s leadership for their personal gain, except for the generalsecretary. He accepted a Land Rover as a gift and ?(%&-:/-;;-8&4#.9&+"-&/(#+>7&(%&?(%&+"-&0)()5$(;&secretary because of lack of transparency in the transactions. The scandal gave the opposition and the media

a strong case against Lula and the PT, especially since the PT had accused the previous political system of corruption and buying votes. Approval of the government dropped rapidly, especially amongst the middle class. In August 2005, 52% -:/#-%%-8&).&5.)08-)5-&$)&_#-%$8-)+&F,;(D1 The PT former president and chief of cabinet, Jose Dirceu, stepped out of the government. This was a blow because Dirceu had been considered a

1 See <http://www.ibope.com.br>. The Brazilian Institute of Public Opinion and Statistics (Ibope) is one of Brazil’s main research institutes and provides the largest collection of information in Brazilian and Latin American markets.

strong candidate to succeed Lula at some point. He was closely associated with the progressive development strategy away from liberal orthodoxy. The opposition did not push for impeachment.

There were two reasons for this: (1) organised labour and civil society – who had supported Lula %$)5-&+"-&.;8&8(>%&Z&-:/#-%%-8&.)1.$)1&5.)08-)5-&in him (this created an atmosphere of polarisation, which the opposition leaders, in particular former president Fernando Henrique Cardoso, were not sure how to handle); and (2) there was only a year to go before elections.The opposition’s strategy was to let Lula bleed

and beat him in the elections set for October 2006. But they underestimated Lula’s personality and the PT in general. Their history was much bigger +"()&+"-&%5()8(;&()8&+"->&"(8&%,405$-)+&;-1$+$9(5>&;-4+&.H-#&+.&01"+&O(5VDIt would not be correct to suggest that the

scandal was decisive in explaining some of the /.;$5>&%"$4+%&+"(+&5()&O-&$8-)+$0-8&$)&+"-&%-5.)8&Lula mandate period. On the other hand it would O-&)($H-&+.&%,11-%+&$+&"(8&).&$)G,-)5-&(+&(;;D&F,;(&had two options. He could remain defensive, which would have made the election campaign 8$405,;+7&.#&"-&5.,;8&9.H-&.)+.&+"-&.44-)%$H-D&Those who attacked Lula were also those

responsible for antipopular policies in the past. They represented the elite, which had concentrated wealth and power in their hands at the expense of the vast majority of Brazil’s population. The reason for the existence of the PT ?(%&5-#+($);>&).+&(O.,+&+#()%4-##$)1&$;;-1(;&0)()5-&to opportunist and conservative politicians. This

A president of the people and for the people. Photo: Ricardo Stuckert

19


integrity was crucial in keeping the militants proud of their president, their party and their own engagement. Already by the end of 2005 Lula had started to participate in public gatherings, especially in areas where he could count on strong support, like in the northeast. At these meetings with the poor he showed that he had not given up +"-&01"+D&The popular movements and organised

labour were fundamental in this strategy. And +"->&1($)-8&$)&$)G,-)5-&9.H$)1&+"-&F,;(&administration towards more developmentalist policies. Party life gained remarkable momentum. Forced onto the defensive in the public debate, party meetings all over the country witnessed massive participation. It was not only Lula who ?(%&0#9&$)&01"+$)1&O(5VD&!.$)5$8-)+;>7&+"-&PT leadership elections, held every four years, were scheduled for the end of 2005. The scandal provoked a rearrangement of international fractions around the need to admit mistakes and show PT’s capacity to overcome them. Participation in the 2005 internal elections went from 230,000 in 2001 to 316,000 in 2005.Without the scandal Lula would probably

"(H-&?.)&+"-&0#%+&#.,)8&.4&-;-5+$.)%&$)&65+.O-#&2006. Instead, he had to face a second round in a highly politicised campaign between centreleft and centreright. The PT focused on the negative aspects of privatisation and the abandonment of the state by the former centreright government. J"->&(8H.5(+-8&4.#&/,O;$5&/.;$5$-%&+.&01"+&social injustice and highlighted the innovative and progressive policies introduced in Lula’s 0#%+&9()8(+-D&*)&+"$%&?(>&+"-&5(9/($1)&()8&+"-&debates for the second round already pointed to a more progressive second mandate.

Second mandate 2007–2010: the golden yearsStrong priority was immediately given to reasserting the leading role of the state in the new developmentalist approach. In 2007 a comprehensive growth strategy called the Programa de Aceleração do Crescimento (PAC) was launched. It was coordinated by the new chief of cabinet, Dilma Rousseff and meant the return to medium and longterm planning, focusing on physical and social infrastructure. Three pillars were presented: (a) transport; (b) energy; and (c) social housing infrastructure. The latter involved an unprecedented nationwide slum upgrading programme and investment in sanitation facilities. Later on it was supplemented by a huge housing 5.)%+#,5+$.)&()8&0)()5-&/#.1#(99-D&This was a break with past neoliberal policies.

Important changes become visible. Economists with leftwing thinking stepped into key positions. Examples include the presidency of the Institute for Applied Economic Research (IPEA), the government’s economic research institute, and the executive director of Brazil in the International Monetary Fund (IMF). Changes also appeared $)&+"-&9$)$%+#>&.4&0)()5-&?"-#-&9($)%+#-(9&orthodox thinking was gradually replaced by heterodoxy. There was, however, no change in the central bank, whose president, a former chief -:-5,+$H-&.405-#&M!B6R&.4&+"-&\()V&.4&\.%+.)7&was given the status of minister. Radical left intellectuals stressed that the main

.#+".8.:&9(5#.-5.).9$5&/.;$5$-%&?$+"&$)G(+$.)&targeting, primary surplus targets set in law to pay 4.#&$)+-#)(;&8-O+&%-#H$5-%7&()8&G.(+$)1&-:5"()1-&rates were still in place. However, the historical

Rocinha Favela, Rio de Janeiro, 2010. Photo: Wikimedia Commons


20

basis of organised labour and civil society, as well (%&9(%%-%&.4&+"-&/..#7&%+#.)1;>&$8-)+$0-8&?$+"&+"-&government and Lula’s rate of approval went up at every poll. Apart from the PAC other mechanisms were

/,+&$)&/;(5-&Z&.#&-:/()8-8&Z&+.&4.5,%&.)&0%5(;&()8&monetary stimulation to accelerate growth. One of the structural problems in Brazil had been the low level of credit in the economy. You were either rich, and did not need credit or you were poor and had no access to credit.

Big increase in minimum wage There was an increase in social transfers, with expansion of the Bolsa Familia programme and a big actual increase in the minimum wage. The democratic constitution of 1988, an outcome of redemocratisation after more than 20 years of military dictatorship, had universalised the right to a state pension linked to a minimum wage. Any increase in the minimum wage, set annually at national level by federal law, has a huge multiplier effect through the state pensions. A real increase in the minimum wage

"(//-)-8&8,#$)1&+"-&0#%+&9()8(+-&MQTg&#-(;&increase in the period between 2003 and 2006). But the increase between 2007 and 2010 was much more impressive: 31%.Besides the PAC, a new package of productive

development industrial policies called Política de Desenvolvimento Produtiva (PDP) was launched. Any reference to industrial policy had been forbidden during the former centreright government’s rule. Neoliberal convention considers that any industrial policy will lead to $)-405$-)5$-%&.4&(;;&V$)8%D&

Another more controversial policy that turned out to be very important in September 2008 was the strategy to expand international reserves to increase external autonomy. Internal reserves were increased from US$ 55 billion in 2005 to US$ 207 billion in 2008. J(O;-&Q&%".?%&V->&01,#-%&4.#&-5.).9$5&

performance divided into four periods. The /-#$.8%&5.$)5$8-&?$+"&+"-&0#%+&()8&%-5.)8&governments of Fernando Henrique Cardoso MY'!R7&()8&+"-&0#%+&()8&%-5.)8&/-#$.8%&.4&+"-&F,;(&(89$)$%+#(+$.)D&J"-#-&(#-&0H-&9($)&H$-?%&.)&".?&+.&$)+-#/#-+&+"-%-&01,#-%&$)&-5.).9$5&/.;$5>&debates in Brazil:1. A liberal approach argues that the much more /.%$+$H-&01,#-%&8,#$)1&+"-&F,;(&(89$)$%+#(+$.)%&– and especially the second – are a result of structural changes introduced by FHC. They just needed some time to show results. In this view Lula acted correctly by not making any change in macroeconomic policies. He harvested the work of his predecessor.

<D& 3&H(#$()+&.4&+"-&0#%+D&J"$%&H$-?&%+#-%%-%&that Lula correctly gave continuity to the macroeconomic policies introduced by FHC, and he got a boost from the international context of high prices for export commodities (China effect).

3. A third view comes from the radical left. They agree with orthodox liberals that there is no fundamental change. However, they argue this is for the worse not the better. The economy is still controlled by rentier interest and the concentration of income and wealth only changed marginally leaving the vast majority of the population marginalised.

!(7'#$89$:#;$#40,0*+4$36&/#-$8<<=>?@8@

New developmentalism?

Figure 1: Credit expansion

Expansion Credit / GDP

Source: IPEAdata Source: IPEAdata

21


4. According to the fourth view, Lula from the start, slowly, and in a responsible way, moved away from the Washington Consensus. This O-1()&+.&"(//-)&$)&+"-&0#%+&9()8(+-&+"#.,1"&increasing the minimum wage and promoting policies that favoured job creation.

5. The last view, with which the author of this 5"(/+-#&$8-)+$0-%7&$%&-:/#-%%-8&O>&Nelson \(#O.%(7&?".&?(%&8-/,+>&9$)$%+-#&.4&0)()5-&until May 2013 (Barbosa et al., 2010). He %($8&+"(+&(;+".,1"&+"-&0#%+&F,;(&(89$)$%+#(+$.)&was different in many aspects to the previous governments, the hegemony of neoliberal views among the key economic policymakers /#-H-)+-8&/#.1#-%%&$)&+"$%&0-;8D&

A clear shift towards a comprehensive neo developmentalist approach resulted in impressive progress. An example of a radical change can be %--)&$)&+"-&01,#-%&.)&5#-8$+&-:/()%$.)D&J"-&V->&-;-9-)+&$)&+"-&%+#.)1&1#.?+"&01,#-%&$)&+"-&F,;(&administration’s second mandate is the impressive increase in credit ratio to gross domestic product (GDP) as shown in Figure 1. In this, the existence of state banks, both commercial (Banco do Brasil; Caixa Federal) as longterm investment through Brazil’s National Economic and Social Development Bank (BNDES) was crucial. 2/-5$05&;(?%&1(H-&9.#-&1,(#()+--%7&4.#&-:(9/;-&$)&".,%$)1&0)()5-D&J"-&-:/()%$.)&.4&5#-8$+&boosted people’s buying power, bolstered by social transfers, increase in the minimum wage, and job creation. A strong and generalised increase in

commodity prices gave Brazil the opportunity to create a stable macroeconomic base. But the

real change came about through the dynamics provoked in the internal market, putting in place a virtuous cycle described in Figure 2.It is important to stress that these are all

policies that were considered impossible without a devastating impact on macroeconomic stability. Orthodox economics had always argued that you cannot create formal jobs without cutting labour rights – that the existence of a huge informal sector shows excessive labour rights and regulation. However, Lula created millions of formal jobs (see Table 2) and, at the same time, changed the ratio of formal to informal jobs in favour of formal jobs. It was done without cutting workers’ rights. Instead incentives, like access to credit lines, were introduced to formalise these jobs. The large drop in unemployment 01,#-%&$)5#-(%-8&?.#V-#%K&/.?-#&+.&8-9()8&formalisation. In the same way, orthodox economics always

argued that a large increase in the minimum wage ?.,;8&5#-(+-&()&$)G(+$.)&-:/;.%$.)D&'.?-H-#7&$)G(+$.)&?(%&V-/+&,)8-#&5.)+#.;&8,#$)1&O.+"&F,;(&(89$)$%+#(+$.)%D&3)8&?$+"&01,#-%&;.?-#&+"()&+"-&$)G(+$.)&,)8-#&+"-&FHC administrations (see Table 1). No doubt the dynamic boost given to the

internal market came from the demand side (see J(O;-&dRD&J"$%&8$8&).+&;-(8&+.&$)G(+$.)&O-5(,%-&production capacity was expanded relatively easily, for example by introducing another shift. Most of the jobs were created in the services sector, but there was also a net increase of jobs in the manufacturing sectors. Consumers’ spending was constantly above

the increase in GDP. This indicated a growing

Figure 2: Growth strategy Table 2: Job creation

Source: Ministry of Labour

Unemployment / Job Creation / GDP


22

dependency on manufacturing imports. But as demand increased so quickly, there was simultaneously space for an increase in national production, with job creation and imports to 5.9/;-9-)+&$+D&J"$%&"-;/-8&V--/&$)G(+$.)&,)8-#&control. However, it meant that the composition of exports/imports gradually changed back to the old logic of exporting commodities and importing manufacturing. Some started to speak about ‘relative deindustrialisation’; others about ‘reprimarisation’. ‘Reprimarisation’ refers to a renewed increase in the importance of the primary sector for Brazil’s export position and for its economic dynamics. This was all relative though, because there was also growth in production and manufacturing jobs in absolute numbers. China became a key player both as an

importer of commodities and as an exporter of manufacturing goods. Suddenly China became Brazil’s second biggest trade partner – as was the case with most other South American countries. Brazil did not have much experience in thinking about how to deal with China. At that time China just looked like a partner in Brazil’s growth strategy. The dynamic expansion of the internal

market was implemented without&%(5#$05$)1&macroeconomic stability. What changed was that the stability was no longer a goal in itself. It was seen as a necessary condition for sustainable expansionist policies to be put into place. So, notwithstanding the prejudice from orthodox economics, which believed that the PT government would opt for irresponsible spending, +"-&/,O;$5&8-05$+&?(%&$)&4(5+&V-/+&,)8-#&5.)+#.;7&(%&can be seen in Graph 1.This allowed the government to improve the

/#.0;-&.4&+"-&/,O;$5&8-O+7&?$+"&9.#-&/#-0:-8&papers, lowering the cost of debt and expanding the time period in which it could be repaid. This allowed the consolidated net public debt to drop in a consistent way from 60.4% of GDP in 2002 to 35.1% of GDP in 2012. This was only interrupted by a temporary increase in 2009 because of strong ()+$W5#$%$%&%/-)8$)1&M+"-&01,#-&?-)+&4#.9&dUD=g&in 2008 to 42.1% in 2009). During the Lula administration the restructured

external debt of the 1980s, the socalled Brady Plan, as well as the debt to the IMF, was paid off in an anticipated way. This was part of President Lula’s policy to reinforce national sovereignty and to change its position on the international scene, especially towards institutions like the IMF and the World Bank, which could be treated as partners and not lenders. At the same time international reserves were built up to be able to respond to turbulences and speculative pressures. During the Lula administration, Brazil changed

its position. It became a net international creditor. A net position in USD means Brazil has more reserves in USD than it has in debt obligations in nominal terms. It must be remembered, however, that the concept of net position is not uncontroversial. This is for two reasons: QD& J"-&),9O-#%&9-)+$.)-8&#-G-5+&%+.5V&).+&G.?%D&J"-&5.%+&.4&+"-&8-O+7&-%/-5$(;;>&+"-&interest rates, is not necessarily equal. For example, the net position of the international reserves is basically held in US treasury bonds with very low interest rates.

2. The liquidity of the debts can differ, with government’s credits being less liquid than its obligations.

Table 3: Consumerled growth A/(B"$89$C&7'+4$)#34+.

Source: IPEAdata; IBGE Source: IPEAdata

23


Having said that, there can be no doubt that the debt position of Brazil has improved considerably, giving more space for autonomous economic policies.

Paying the social debt: changing the logic It had been part of leftwing thinking to suggest (&+#(8-W.44&O-+?--)&/(>$)1&+"-&/,O;$5&0)()5$(;&debt and investing in social policies. The Lula administration successfully argued that social debt can be addressed without upsetting the national and internal creditors. Attacking poverty and diminishing inequality was at the top of the agenda. But how could it be achieved without confronting the privileges of the powerful elites? The strategy was to set up a range of policies

that focused on directing growth to the poor and working classes. This was, for sure, the biggest achievement of the Lula administration. Economic growth and job creation had also been achieved in the past with national development strategies. Although successful in transforming Brazil from an agrarian society into an industrialised country, it was at the expense of increasing inequality. The 1.;8-)&#,;-&?(%&+"(+&+"-&5(V-&"(8&+.&1#.?&0#%+&before we could discuss distribution. As Table 4 shows, the result could not have been better. During the Lula administration those falling

$)+.&+"-&b9.%+&/..#&QPgK&5(+-1.#>&M0#%+&5.;,9)R&had the biggest increase in their real income accumulated during the eight years. This diminishes progressively to a 12% increase for the ‘most rich 10%’ category (the last column).This was something completely new for Brazil.

The h$)$&5.-405$-)+7&?"$5"&$)8$5(+-%&$)5.9-&inequality, started to improve. We must remember,

however, that we are talking about correcting a process of income and wealth concentration that is deeply rooted in Brazil’s social and economic formation (see Graph 2). Although the Lula administration can be proud of starting a new paradigm, the road to transforming social relations is still very long.J"-&01,#-%&#-G-5+&G.?%&()8&).+&%+.5V%D&

Income can also be generated from the concentration of wealth; for example, if it circulates through offshore tax havens, which is not necessarily captured in this graph.As mentioned earlier, several policies were

simultaneously set in place to achieve: ]& %.5$(;&+#()%4-#%&4.#&+"-&-:+#-9-&/..#]& (&%+#.)1&$)5#-(%-&$)&+"-&minimum wage that would also affect state pensions

]& I.O&5#-(+$.)&Z&;-(8$)1&+.&$)5#-(%-8&O(#1($)$)1&power with collective agreements achieving ?(1-&$)5#-(%-%&(O.H-&$)G(+$.)&()8&+"-&5#-8$+&lines.

Graph 3 shows the strong increase in the minimum wage during the Lula administration in ).9$)(;&01,#-%&$)&+"-&\#(C$;&#-(;&M\`FR7&\#(C$;K%&currency. The minimum wage is nationwide ()8&,%-8&+.&O-&0:-8&O>&!.)1#-%%&-H-#>&X(>D&However, in 2007 the trade union movement proposed a new rule that was accepted by government and Congress. The increase in the 9$)$9,9&?(1-&?.,;8&4.;;.?&(&0:-8&4.#9,;(L&+"-&average GDP increase over the past two years + +"-&$)G(+$.)&$)&+"-&/#-H$.,%&>-(#D&J"$%&9-()%&+"(+&+"-&9$)$9,9&?(1-&?.,;8&O-&(8I,%+-8&4.#&$)G(+$.)&as well according to the increase of the economy (%&(&?".;-D&J"$%&4.#9,;(&?(%&#-(40#9-8&O>&President Dilma and will have effect until 2015.

Table 4: Growth with income distribution Graph 2: Evolution of income inequality

Increase in real income (2004–2011) !"#$%&'#()*'(')+#,-./',(&)0123'$4)Less inequality, but still champion

Source: Ministry of Finance Source: IPEAdata


24

As a result, for example in 2012, although the economy grew only 1%, the minimum wage was raised by 12%. Liberal economists consider this rule as one of the worst economic policy measures of the Lula and Dilma administrations.

Social transfers: improving life for the poor It would be wrong to only focus on Brazil’s social transfer programme, which got international recognition, amongst other reasons, because of the World Bank’s interest in exporting the model to .+"-#&5.,)+#$-%D&J"-#-&?-#-&.+"-#&/.;$5$-%&+.&01"+&extreme poverty, including free lunch for children (+&/,O;$5&%5"..;%7&9(%%$H-&-;-5+#$05(+$.)%7&nationwide slum upgrading policies, and social housing. Notwithstanding the legitimacy and the need

for social transfers, there can be no doubt that decent jobs are the best way to overcome social exclusion. The propoor policies were seen as essential to create conditions for poor families to be able to enter the labour market. The overall social transfer programme started

in 2003 by putting together existing bits and /$-5-%&.4&/.;$5$-%D&Y#.9&+"(+&/.$)+&.)7&+"-&O-)-0+%&?-#-&-:+-)8-8&()8&$9/#.H-8D&!,#$.,%;>7&+"-&0#%+&reaction of the opposition – echoed in the main press – was that the programme would not work. They said it was too ambitious. And it is true that there were serious problems in the beginning, which led to a change in the responsible ministry. But by using the structure of the public bank Caixa Federal, the programme was put in place. Then the criticism was that it would make people lazy. They would not go after work anymore. That was of course typical upper middle class prejudice. When the programme was running

successfully and even the World Bank applauded $+7&+"-&.//.%$+$.)&%+(#+-8&+.&#-9-9O-#&+"(+&+"-&0#%+&steps were made during their administration. So, after President Lula’s two mandates, a consensus was reached around the need to have nationwide social policies to eradicate hunger and extreme poverty. In the 2010 presidential elections’ campaign

none of the main candidates attacked the programme. On the contrary, they stressed their commitment to maintain and improve it. J(O;-&=&%".?%&+"-&O-)-0+%&1$H-)&$)&<PQdD&

The core of the social transfers is the Bolsa Familia, which has very low overhead costs and represents less than 0.5% of GDP. To access the O-)-0+%7&4(9$;$-%&"(H-&+.&5.99$+&+"-9%-;H-%&+.&sending their children to school and to having them vaccinated. These conditions can also be interpreted as additional rights because the state has to guarantee access to them. The main enigma of the future socialpolitical

dynamics in Brazil will be to see how those given an opportunity to overcome social exclusion will formulate new political demands. Is it possible to keep going on this road without putting into question the privileges of the upper middle class and the elites? The consensus described above around the

need to eradicate hunger and extreme poverty is not present when it comes to the reduction of income inequality. In fact, there is a clear attempt to depoliticise this issue, by suggesting that the poor have been transformed into the middle class. If the whole of Brazil is becoming middle class, there is no need for income distribution.2

2 For a critical analysis of this issue see Marcio Pochmann (2012).

Graph 3: Evolution of the minimum wage Table 5: Social transfers

Negotiated rule for automatic increase: average increase GDP of !-$()(6/)=#-"$)L)%'@-(%/')/0)!-$()=#-");$%'2#)FGGM>

Expansion in social transfers

Source: Ministry of Social Development

25


This chapter has so far focused on economic 01,#-%D&\,+&+"-&F,;(&(89$)$%+#(+$.)&"(%&implemented many policies to change social relations. One example is opening private and public universities to lowerclass students and especially black and indigenous students through quota systems, which the white elitedominated press has attacked. There is no space in this chapter to sum

up the different policies that have opened up opportunities for the lower classes to improve their quality of living and be convinced that the future will be better for their children. Table 6 shows the impressive expansion of

the private and public university structures. The feefree public universities are generally of high ^,(;$+>&O,+&"(H-&(&8$405,;+&-)+#()5-&-:(9&%>%+-9D&In practice this means mostly students from upper middle class families with expensive private high school backgrounds would get admitted. This is of course an example of the extreme privileged position that reproduces inequality. The Lula administration expanded the federal universities – something that had not been done for many years – and gradually introduced a quota system with mandatory access for public high school students. The quota system included a racial quota.

Productive investment This chapter spoke earlier about the national development bank, BNDES, which was set up at the beginning of the 1950s by the nationalist government of Getulio Vargas. During the more liberal governments BNDES was sidetracked because the key formulators of economic policy were ideologically opposed to any kind of industrial policy. The dynamics

of investment would come from foreign direct investments (FDI) through a whole programme of privatisation. BNDES was given a key role in administrating

the privatisation processes. But the institution – like several others – was too big and powerful to be privatised. At best they could be forced to operate as if they were private. This is an important difference between Brazil and other South American countries where these kinds of instruments for developmental policies no longer exist. This is, for example, the case of Argentina, where neoliberalism had been much more devastating. BNDES, alongside the commercial

public banks, played a key role in the Lula administration. In practice, BNDES is the only %.,#5-&.4&;.)1W+-#9&0)()5-&$)&;.5(;&5,##-)5>D&Graph 4 shows a substantial increase in lending during the second Lula administration; especially in reaction to the global crises. Table 7 shows the impressive increase in

assets and net equity; and explains the structure .4&+"-&0)()5$)1D&\(%$5(;;>&+"-&$)+-#-%+&#(+-%&(#-&lower than the market. Having said that, however, in reality there isn’t a market; private banks do ).+&-)1(1-&$)&;.)1W+-#9&/#.8,5+$H-&0)()5$)1D&The stock market is also poorly developed, as is the capital market for debentures. Strong internationallyoriented companies can get outside funding, but that would be in USD with the currency risk.BNDES’s basic funding comes from an

earmarked contribution from companies’ net operating revenues, which goes to a workers’ fund. By law this workers’ fund must invest at least 40% of its funds into BNDES. The fund is rewarded with a special interest rate called TJLP

Table 6: Expansion of access to universities Graph 4: Evolution of BNDES lending

Investment in the future 056!7)/1,8'&)9'()0:;<

Source: BNDESSource: Ministry of Education


26

(Taxa de Juros de Longo Prazo, longterm credit #(+-R&%-+&O>&+"-&9$)$%+#>&.4&0)()5-D&6)&+./&.4&+"$%&come the basic spread, credit risk rate and the 0)()5$(;&(1-)+&%/#-(8D&\,+&-H-)&%.7&+"-&9(:$9,9&nominal interest rate would be 13.37%, with real $)+-#-%+&#(+-8&4(#&O-;.?&0)()5$(;&9(#V-+&;-H-;%&$)&Brazil.

The 2008 global economic crisisIf the crisis had to happen it came at the right moment for Brazil. President Lula had been $)&.405-&4.#&0H-&>-(#%D&'$%&(89$)$%+#(+$.)&"(8&recovered – with strong popularity – from the 2005 political crisis. Internationally Lula as president and Brazil as a country had gained prestige. The economy was booming and growing at more than 7% on a yearly basis with discussion O-$)1&(O.,+&+"-&$)G(+$.)(#>&/#-%%,#-%&.)&+"-&-H-&of the collapse of Lehman Brothers. The crisis put main exporters’ use of currency

derivatives to make easy money with their USD on the radar. They did this by speculating on the continuous appreciation of the Brazilian currency. J"-&5#$%-%&/#.H.V-8&(&G$1"+&+.&;$^,$8$+>&Z&9-()$)1&to the USD – which prompted a huge devaluation. This meant losses in billions for those who had held strong positions in the currency derivate 9(#V-+D&\,+&O-%$8-%&+"(+7&+"-&0)()5$(;&%>%+-9&$)&Brazil was solid and conservative. It was easy to make good money by just buying government bonds and gaining from the record high interest rates. The impact of the crises came from the

psychological effect of freezing all kinds of credit

lines. Through the real economy it came with 5.99.8$+>&/#$5-%&,)8-#&/#-%%,#-&()8&8$405,;+$-%&with exporting goods. The Brazilian government responded differently to many countries, and to ?"(+&\#(C$;&8$8&$)&+"-&/(%+&0)()5$(;&5#$%-%D&\#(C$;&could control the effect of the crisis over a sixmonth period and prevent a real collapse of the currency. It didn’t need to put up the interest rate +.&/#-H-)+&4,#+"-#&5(/$+(;&G$1"+D&A-$+"-#&8$8&$+&need to cut government spending. In fact, Brazil expanded it. Social transfers were expanded. A huge

social housing programme Minha Casa, Minha Vida (My House, My Life) was put in place with ambitious targets, especially for subsidised housing for the lower classes. The increase in the minimum wage was maintained – and even anticipated. Y.#&+"-&0#%+&+$9-7&\#(C$;&?(%&#-1(#8-8&O.+"&

internally and internationally as part of the solution, not part of the problem. Coincidently Brazil was in the rotating presidency of the 9$)$%+-#$(;&hW<P&M(&1#.,/&.4&0)()5-&9$)$%+-#%&and central bank governors from 20 major economies) and therefore played a leading role in its transformation. All this increased Brazil’s self5.)08-)5-7&O.;%+-#-8&O>&(&[D=g&$)5#-(%-&$)&GDP in 2010.J"-&0)()5$(;&5#$%-%&.4&+"-&QTTP%&"(8&

undermined the government coalition and led to the 2002 victory of Lula and the PT. The 2008 crisis, on the contrary, reinforced the Lula administration and made it possible in 2010 to elect Lula’s chief of cabinet, the relatively unknown Dilma Rousseff, as president.

Table 7: Evolution of BNDES assets and equity

056!7)'().=%1,>)90:;<

Assets Net Equity

2003 152 billion 16,7 billion



Interest rate?

TJLP 5%

Basic spread up to 1.8%

Credit risk rate up to 3.57

Financial agent spread +/- 3% Subsided social housing programme Minha Casa, Minha Vida (My House, My Life) for poor communities. Photo: Roberto Stuckert Filho/PR

27


D$'&45;$3,)9$022E-"0/#$0+'$/#-#/F#-$Before turning to Dilma Rousseff’s economic policies let’s take a quick look at Brazil’s discovery of huge oil reserves. Here again, Brazil, was more than lucky. The discovery was made in 2006 and announced in 2007. This was when the Lula administration had a clear vision, popularity, and the credibility to pursue a new developmental policy approach. The oil reserves have the potential to transform

Brazil into a world player in the oil and gas $)8,%+#>D&\>&<PPN&$+&"(8&(5"$-H-8&%-;4W%,405$-)5>7&with production of around two million barrels a day. In 10 years’ time this could be trebled. The Lula administration interrupted the process of auctions for concession rights at the end of 2007. It started to draw up a new legal framework for oil and gas exploration and production by introducing a sharing system. In practice this means a moderate renationalisation policy that will not affect past contracts. The new regulations were approved by parliament in December 2010, which was the last month of Lula’s second term. It is not likely that such changes would have

taken place during the previous government, or -H-)&8,#$)1&F,;(K%&0#%+&9()8(+-D&2.7&$)&+"$%&%-)%-&the timing of the discovery was convenient. More details on this can be read about elsewhere.3

2011–2012: a new momentTable 8 shows that since the 2008 crisis there has been a strong and ongoing increase in Brazil’s

3 See Giorgio Romano Schutte (2012 and 2013).

9(),4(5+,#$)1&+#(8-&8-05$+7&(;+".,1"&+"-&.H-#(;;&trade balance remained positive due to strong commodity exports. The trade balance fell from US$ 46 billion in

<PPN&+.&@2f&QT&O$;;$.)&$)&<PQ<D&J"$%&#-G-5+%&+"#--&things: 1. The impact of low economic activity worldwide, in particular due to the downturn in Europe.

2. The result of the strong appreciation of the local currency, which made imports even cheaper. The Lula administration had already put several policies in place to stop excessive appreciation of local currency. These included (&+(:&.)&$)5.9$)1&0)()5$(;&G.?%&.4&Ng&and intervention of the central bank on the currency market.

3. To compensate for the lowering demand in the European and North American markets, the Chinese export strategy towards Brazil became more aggressive.

This all had a very negative impact on the investment climate in Brazil. On top of it, the government took a wrong decision at the beginning of 2011. Against the strong growth 01,#-&.4&<PQP&M[D=gR7&+"-&+#(8$+$.)(;&#-(5+$.)&was to increase interest rates to prevent supposed $)G(+$.)(#>&/#-%%,#-%D&3+&+"(+&+$9-&+"-&$8-(&?(%&that the international context was improving. And so the basic interest rates were increased month by month between January and July from 10.75% to 12.5%. This turned out to be the wrong analysis. As a consequence there was a huge increase in the 9(),4(5+,#$)1&+#(8-&O(;()5-&8-05$+7&?"$5"&

Table 8: Strong increase in the manufacturing ./()#$)#34+.

Manufacturing trade balance in USD billions

Graph 5: Currency appreciation

0123'$)!?/@2(=,):2&,)A76

Source: Ministry of Development, Industry and Foreign Trade Source: IPEAdata


28

more than doubled between 2010 and 2013. It is ).?&#-(5"$)1&5;.%-&+.&(&8-05$+&.4&@2f&QPP&O$;;$.)D&This is compensated by even bigger exports of primary products. But the overall trade surplus is getting smaller. One has to remember that Brazil still had a surplus in the manufacturing trade balance up until 2007. Calculations of the current 9(),4(5+,#$)1&+#(8-&8-05$+&%".,;8&).+&O-&;$9$+-8&+.&+"-&.405$(;&+#(8-&01,#-%D&\#(C$;&"(%&(&%,#/#$%$)1&.H-#&@2f&<P&O$;;$.)&8-05$+&$)&+"-&+.,#$%9&(55.,)+7&which is very much about a wealthy middleclass buying Asian products in foreign counties (like clothes and electronics). In other words, there "(%&O--)&(&%$1)$05()+&()8&(88$+$.)(;&$9/.#+&.4&manufacturing goods. Low he_&1#.?+"&01,#-%&$)&<PQQ&M<D[gR&()8&

2012 (1%) have put pressure on the government. *+&"(%&1$H-)&)(+$.)(;&()8&$)+-#)(+$.)(;&0)()5$(;&interests and the political opposition ammunition to attack the new developmentalist approach. As explained before, the growth strategy was based on expanding the demand side that was, of itself, supposed to stimulate an increase in investment. This has now reached a limit. The strategy needs to focus on the supply side, especially considering +"-&1#.?$)1&8-9()8&O-$)1&%(+$%0-8&O>&MChinese) imports, which does not lead to jobs and income generation in the country – or even in the region. The Dilma administration is very clear about

not giving up on achievements gained so far. While production and investment were down; income, jobs, social transfers and consumption continued to be reinforced. This explains the overwhelming popularity of the Dilma administration in the period 2011 to 2012 despite H-#>&8$%(//.$)+$)1&.H-#(;;&1#.?+"&01,#-%D&The Dilma administration’s challenge is to

tackle some structural characteristics of Brazil’s economic reality. In particular, the record high interest rates and the currency’s appreciation ;$)V-8&+.&+"-&$)G.?%&.4&0)()5$(;&5(/$+(;D&*)&O.+"&cases this meant confronting both national and international vested interests. Graph 5 shows the evolution of the exchange

rate’s strong appreciation since the beginning of the Lula administration, interrupted only during the 2008 global crisis. Graph 6, however, shows the result of a clear policy decision to regulate the exchange rate in what some call ‘current account protectionism’.

Courageous decisions – one step forward Much more courageous was how the interest rate policy was dealt with. President Dilma had already broken with the tradition of appointing a !B6&4#.9&+"-&/#$H(+-&0)()5-&?.#;8&(%&/#-%$8-)+&of the central bank. She appointed a central bank staff member.

Discovery of oil in 2006 has the potential to transform Brazil into a global player in oil and gas. Photo: Agência Brasil

Graph 6: Regulated exchange rate

0123'$)!?/@2(=,):2&,)A76

Graph 7: Recent (r)evolution in Brazil´s interest rate

02>'/)'(&,1,>&)12&,)B#$'/C

Source: IPEAdata Source: IPEAdata

29


*)&2-/+-9O-#&<PQ<&+"-&0)()5-&9$)$%+-#&()8&the president herself pushed for a clear reduction in the interest rate, contrary to socalled market expectations. This marked the beginning of national and international attacks on the Dilma administration as not being reliable and being too stateoriented – amongst other things. Real interest rates went down from more than 4.9% in 2011 to 1.4% in 2012. This was a new reality for \#(C$;&?"-#-&0)()5$(;&$)+-#-%+%&?-#-&.#1()$%-8&around the logic of high nominal and high real interest rates. Due to this, public expenditures with interest on the internal debt fell from 5.7% in 2011 to 4.8% of GDP in 2012. This was still very "$1"&O>&$)+-#)(+$.)(;&%+()8(#8%7&O,+&4.#&+"-&0#%+&time in the 21st century under 5%. The government was accused of giving up the

central bank’s independence. But we would argue the contrary: since September 2012 the central bank has become increasingly independent from /#$H(+-&0)()5$(;&$)+-#-%+%D&Apart from regulating the exchange rate to stop

excessive currency appreciation, and putting the interest rate on a structural new level, the Dilma (89$)$%+#(+$.)&+..V&.)&(&+"$#8&01"+D&J"$%&?(%&against vested interests in the electricity world. Existing concessions for electricity generation and distribution would only be renewed against strong discounts in prices. The administration argued that high investments in water dams had been paid off already. It says what counts now is existing production costs, which are low with hydro power.All of this created an atmosphere of strong

distrust in President Dilma by the socalled markets, and attacks on her credibility. At the same time, the economy needed some time to adjust to the new relative prices, which affected the whole economy, like the exchange rate, the interest rate, and the cost of electricity. J"-&8#./&$)&+"-&$)H-%+9-)+&#(+-&#-G-5+%&+"$%&transition period while conditions are created to start a new growth cycle with an increase in investments. This should stimulate an increase in productivity. This is essential for continuity in the development strategy with income distribution that was started under the Lula administration. The challenge is to increase the rate of investment. A set of industrial policies has been set in place, especially around local content requirements.

One step backward Concerning the exchange rate, the discussion of an end to the US quantitative easing policy helped to prevent roll back in the devaluation of the BRL. But in the case of the interest rate, the pressures became too strong. Expectations about outof5.)+#.;&$)G(+$.)&9(8-&+"-&1.H-#)9-)+&1$H-&,/&$+%&01"+&(1($)%+&"$1"&$)+-#-%+&#(+-%D&J"-&central bank started once more to increase the rate in April 2013 from 7.25% to 9.25% in October 2013. Financial markets happily commented on the expectation of two digits by the beginning of 2014 (10.25% in January 2014). *)&+"-&9-()+$9-7&+"-&5,##-)+&(55.,)+&8-05$+&

steadily increased from US$ 28,3 billion (1.91% of GDP) in 2008, to US$ 47,5 billion (2.28% of GDP). At the end of 2013 there will probably O-&(&5,##-)+&(55.,)+&8-05$+&.4&@2f&W[U7d&O$;;$.)&(3.67% of GDP). The economy is being kept alive with record primary product exports and surprisingly, record FDI. In fact FDI has been very strong over the last

three years, surpassing expectations from both government and market. The United Nations Conference on Trade and Development’s M@A!J3eR&01,#-%&%".?&+"(+&$)&<PQ<&\#(C$;&was just behind the USA and China/Hong Kong, with over US$ 60 billion FDI. But so far these $)G.?%&"(H-&).+&5.)+#$O,+-8&+.&()&$)5#-(%-&$)&+"-&overall investment rate. Already the investment rate (19.5% of GDP in 2010) dropped to 18.3% of GDP by mid2013. Manufacturing, which increased its output 23% between 2003 and 2008, has seen a drop of 3% between 2009 and 2012.However, consumption has been strong despite

;.?&he_&01,#-%D&J"-#-&?(%&(&Ng&$)5#-(%-&$)&consumption in 2011, and 5.3% in 2012.4 This means that the logic of dynamic internal markets still works to keep unemployment records low, with jobs being created in the services sector, which is not exposed to (Chinese) competition. Political forces are already organising

themselves for the next presidential elections in October 2014, and so it is unlikely that President Dilma Rousseff will change policies before then. But, to stop deindustrialisation, her administration will be forced to come forward with some strong heterodox measures in its expected second term.

4 See IPEAdata/IBGE <www.ipeadata.gov.br>.


30

Despite the media suggesting divisions and changes between Dilma and Lula, their alliance is strong. Lula is around to assist her in the ongoing battle to keep the Lula Moment alive, with incremental changes that should eventually lead to structural changes in favour of the working class. In midOctober Lula was interviewed by a progressive Argentinian newspaper Pagina 12. When asked whether he really would not go for presidency in 2014 he said:

My candidate is Dilma. My second term was much O-++-#&+"()&+"-&0#%+7&%.&+"$%&?$;;&(;%.&O-&+"-&5(%-&with Dilma.

According to Lula, by 2019 we should be able to present the ‘Dilma Moment’. !

References

Barbosa, N., e Souza, P., Antônio, J. (2010) ‘A !"#$%&'()'(*'+$,"'(-./01(2'/34!50($5'"67!508(crescimento e distribuição de renda’, in E. Sadar and M.A. Garcia (eds), Brasil entre o Passado e o Futuro. São Paulo: Editora Fundação Perseu Abramo: Boitempo.

Pochmann, M. (2012) Nova Classe Media? Edit Boitempo.

Schutte, G.R. (2012) ‘Panorama do pré90/1()$90:'9($(';',4."!)0)$9’. TD 1791 IPEA <http://repositorio.ipea.gov.br/bitstream/11058/998/1/TD_1791.pdf>.

Schutte, G.R. (2013) ‘Brazil: new developmentalism and the management of the offshore oil wealth’. European Review of Latin American and Caribbean Studies 95.

Giorgio Romano

Schutte is professor of economics and international relations at the Universidade Federal do ABC (UFABC) (Federal University) based in the metropolitan

area of São Paulo, Brazil. He is at present coordinating the international relations course. Giorgio is advisor to the Perseu Abramo Foundation, the PT’s research institute. He was an advisor to the 2$*&!.*"'!%0+1#,)*+.($!"-+9$*&!.*"'+:(0%;&+,$&'+3%".%'*<+%".+=%&+.*2('>+&*)$*'%$>+#1$+International Relations in São Paulo during the PT administration of Marta Suplicy (2001–2004). Giorgio has worked for many years with the Brazilian and international trade union movement.

!"#$%&'()*+*"#&(,)-"*.(

Population: 200 million

Continental area: 8,511,966 km2

Maritime jurisdiction: 4,451,766 km2

GDP in US$ (2011): 2,5 trillion (rank 6)

GDP per capita income (2010): US$ 10.900

HDI (2010): 0,718 (rank 84)

Brazil: history in a nutshell

1500: arrival of Portuguese

1822: independence

1888/1889: end of slavery/Republic

1930: nationalist revolution

1964 – mid-1980s: military dictatorship

1988: new democratic Constitution

2002: election of Lula

2006: discovery huge oil reserves

2010: *0*)'!1"+1#+?!03%7+,$&'+=13*"+2$*&!.*"'

2014: FIFA World Cup

2016: Olympic Games in Rio de Janeiro

2022: 200 years of independence!

President Dilma Rousseff, Alvorada Palace, 2011. Photo: Roberto Stuckert Filho, Agência Brasil

31

Brazilian newspapers asked themselves why there was all the tumult in Turkey in May 2013. It has performed so well

both in general growth terms and in creating new opportunities for young people. A couple of weeks later, in June 2013, a totally unexpected revolt broke out in Brazil itself – now referred to as the ‘June Movement’. There are many analyses of what happened.

And it is not at all clear what the real impact will be on the political dynamics in Brazil. The movement went from a couple of hundred protesters in the main cities to hundreds of thousands all over Brazil. But as quickly as it grew, it fell back again to a couple of hundred who, by August 2013, were still trying to keep the movement alive. The 15yearold daughter of the author of this chapter is an example. She had never participated in anything related to protest; her Facebook was all about fun and boys. Suddenly she found herself in the middle of a protest seeing her black boyfriend being brutally beaten up by special police forces. She had three weeks of political militancy using Facebook as a powerful tool to mobilise all her friends. By August all that had gone.What can we make of this? First of all, what

happened in June has a lot to do with the political and economic situation in Brazil. But equally, it cannot be understood only in these terms. It also shows the powerful capacity of Facebook and related social media instruments to mobilise people and create mass movements of any kind. Was it spontaneous? No, in my opinion it was not. First, there was President Dilma who asked

the mayors of big cities, especially São Paulo and Rio, to wait until June to raise public transport 4(#-%&(%&(&?(>&+.&/#-H-)+&$)G(+$.)(#>&/#-%%,#-%D&The analysis was that at the beginning of the year +"-#-&?(%&+-9/.#(#>&$)G(+$.)(#>&/#-%%,#-&8,-&to food price increases. It was argued that these were related to climate circumstances and would

be gone by the middle of the year. This created an unforeseen situation: public transport prices would be increased in the main urban centres in the same period. This made it possible to organise a national campaign around the local transport fares.Second, since 2005 the youth movement

Movimento Passe Livre MX_FR&"(8&O--)&01"+$)1&for free public transport. The MPL comprises mainly intelligent radical left students who are not related to the traditional left wing parties, especially the Partido dos Trabalhadores (PT) – the Workers’ Party – but it is not necessarily antiPT (some are, but not as a movement). They had been organising demonstrations over the last years; mobilising a couple of hundred supporters and, in some cases, a couple of thousand. Most importantly, they accumulated good arguments pointing to private transport companies’ lack of transparency and accountability. The municipalities contract these companies to deliver the public transport. The socalled black box. Third, there was the brutal police repression

against the MPL demonstrations when the mayors of São Paulo and Rio started to announce the yearly increase in public transport prices. That repression shocked Brazilian society and prompted thousands of people to go to the streets in solidarity and protest. Fourth, by chance this period coincided

with the start of the FIFA Confederations Cup in Brazil. There is no need to explain to South Africans the way FIFA operates and blackmails the government to get what it wants. The link between the socalled ‘FIFAstandard’ and the 8$405,;+$-%&.4&1.H-#)9-)+%&$)&\#(C$;&M4-8-#(;7&state, and municipal) to get social infrastructure and public goods completed, is striking. Banners like ‘We want FIFAstandard public health’ were very powerful mobilising instruments. So football turned out not necessarily to be the opium of the Brazilian working class after all.

POSTSCRIPT

AND THEN THERE WAS THE JUNE MOVEMENT



32

Fifth, the PT made terrible mistakes. The mayor of São Paulo is from the PT and, in his 0#%+&>-(#&.4&1.H-#)9-)+7&"-&?(%&,)/#-/(#-8&to react. That is more or less understandable because it all came as a surprise. But much worse was the reaction of the local PT. There is no 8.,O+&+"(+&O>&4(#&+"-&9(I.#$+>&.4&+"-&#()VW()8W0;-&supported the demand to freeze public transport prices. However, the PT leadership was afraid to oppose the PT administration. After more than 150 years’ discussion about

the need for the independence of the workingclass movement, the PT’s and CUT’s declarations were just not understandable. They said a lot about the need for good and affordable public transport but nothing about the very concrete issue at stake… until the very moment that the mayor was forced to announce it would freeze the fares. What was at stake was the bus fares (municipal responsibility) and the metro (state responsibility). The state of São Paulo has been administrated for many years by the main opposition to the PT government, the Partido da Social Democracia Brasileira (PSDB). The general public perceived the PT and

the PSDB administrations to have the same arguments against the MPL demands. For lack of space I will not go into the details of the situation in other cities. But in Rio, where the mayor and governor are from, a socalled allied centre party, the Partido do Movimento Democrático Brasileiro (PMDB), the situation turned out to be even more paradoxical. It ended up reinforcing the PT candidate for the next governor elections for the State of Rio de Janeiro in October 2014. So suddenly there was a mass movement in

Brazil without the PT’s and CUT’s banners – for +"-&0#%+&+$9-&%$)5-&+"-$#&5#-(+$.)&$)&QTUP&()8&1983 respectively. The other traditional leftwing movements like the students’ União Nacional dos Estudantes (UNE) or the Landless People’s Movement (MST) were also totally absent.Six, at this point the rightwing mass media

changed its position. In the beginning it had called the demonstrators ‘vandals’ and then suddenly they were the ‘heroes’. The mass media started to applaud the youth and openly promoted 8-9.)%+#(+$.)%D&\$1&0#9%&(8(/+-8&+"-$#&(8H-#+%&on TV by including mass gatherings in public streets. Suddenly everybody was in favour of the demonstrations. The right wing thought it would

be a voice against the Dilma administration, or at least weaken the PT; the left because it started to see the movement as a powerful alliance to press for more changes against conservative forces in Congress.

And then?Public transport prices were frozen and in some cities even decreased. The FIFA Confederations Cup came to an end; Brazil won. The July school and university holidays arrived and the June Movement disappeared. Approval ratings of all politicians in power, left or right, fell strongly. Dissatisfaction with the Dilma administration doubled to 30% – still not dramatic. Figures show that she will win the elections in the second round. Only Lula would win the elections in +"-&0#%+&#.,)8&$4&"-&%+..8&(%&(&5()8$8(+-7&?"$5"&"-&?$;;&).+D&2.&$+&$%&8$405,;+&+.&%--&+"-&a,)-&Movement as a mass revolt against the Lula heritage. Lula insists that Dilma Rousseff is his candidate and that the PT should never be afraid of street protests; it should learn to open up to young people who grew up under the Lula administration and do not know what neoliberal policies are. By October, Dilma had already recovered much of the support she had lost in the pools.With all the progress that has been made,

Brazil has still one of the most unequal income distributions in the world. If you live in the poor areas you are now given a chance to study at university, but you are still stuck in transport for at least one hour to get there. The reasons to go to the streets are many. But at the peak of the June Movement, with hundreds of thousands in the streets all over Brazil, together with the media’s support, the slogans were as general as ‘Better education’, ‘Better health’ and ‘Against corruption’. Who isn’t?There were no mass protests against the

Dilma administration as such, so it couldn’t be compared at all to the Arabic Spring Movement. *)&%.9-&5(%-%&M`$.&%/-5$05(;;>R7&+"-&_JK%&%,//.#+&will even increase because of the protests. But on the whole, the June Movement gave a clear sign that there is much more energy for transformation in society than we had thought. The PT and the CUT just have to learn again to tap that energy and never be afraid of it. !

33

CHAPTER 2

BRAZIL: LIMITS OF A PRECARIOUS DEVELOPMENT MODEL

:%C)012=2

Popular resistance at Pinheirinho, São Paulo, 2012. Photo: http://ultraultrapassado.wordpress.com


34

The presidential election of the most important trade union leader in Brazilian history, Luiz Inácio Lula da Silva, and

his rise to federal power as leader of the Partido dos Trabalhadores (PT) – the Workers’ Party – attracted worldwide attention. But hope that the new government would distance itself from previous governments’ neoliberal policies quickly gave way to scepticism.This was because the new government

decided to uphold the central bank’s operational autonomy and to maintain very high percentages of basic interest rates. In addition, the government 9($)+($)-8&+"-&-:$%+$)1&$)G(+$.)(#>&+(#1-+&/.;$5>&(%&?-;;&(%&G,5+,(+$)1&-:5"()1-&#(+-%D&Reforms increased the number of years that

civil servants contributed to the state pension fund ()8&(;%.&#-8,5-8&+"-$#&O-)-0+%D&J"$%&;-4+&9()>&who had placed their hopes for change in a PT government somewhat perplexed.

!/(,-20/*(.+0,9$8<G@>8<<@How can one explain this change in strategy by one of the biggest and most important leftist political parties in Latin America? In fact, the victorious election of Lula – a

former steel operator – as president of Brazil was the climax of decades of profound transformation, both of the capital accumulation regime, and of regulatory processes in the country.Despite having achieved relative success

for approximately one and a half decades, the authoritarian regime was trapped in an obvious crisis at the end of the 1970s.With the redemocratisation of the country, an

attempt to replace democracy with neopopulist regulations supported by a ‘social pact’ with the new trade unionism proved impossible. But Fernando Collor’s electoral victory in 1989 meant the transition to a neoliberal agenda.From then onwards, the regime of

accumulation became subject to continuous structural adjustments like outsourcing, /#$H(+$%(+$.)7&()8&0)()5$(;$%(+$.)D&J"$%&9-()%&0)()5-&5(/$+(;&$%&8.9$)()+&(+&+"-&-:/-)%-&of investment in productive activities. This eventually led to postFordism in the country.Despite the improvement of regulatory

processes led by Lula’s bureaucracy, this accumulation regime was easily consolidated in the decade from the year 2000.

From a critical sociological perspective, we 5()&%(4-;>&%(>&+"(+&+"-&9.%+&$)G,-)+$(;&%+,8>&.4&postFordism in Brazil was that of sociologist Francisco de Oliveira (2003) (De Oliveira et al., 2010).

A new social classIn his study, after revisiting the United Nations Economic Commission for Latin America (CEPAL)’s theory on the underdevelopment of Brazil, De Oliveira put forth his famous hypothesis on the emergence of a ‘new social class’ in the country. This class is based on the links between the highest echelon of social security fund managers and the trade union elite who sat on the boards of directors of the same funds.According to De Oliveira, at the moment

when the ‘intellectual and moral direction’ of Brazil’s society seemed to move in favour of the lower classes, having elected Lula’s trade unionist bureaucracy in 2002 to lead the state, the bourgeoisie revealed itself to be more robust than ever.De Oliveira called this strange ‘transformist’

phenomenon an ‘inverted hegemony’ – when the ‘underdog’ seems to be leading the state according to a programme devised by the ‘upper classes’. The political, intellectual and moral victories of the ‘underdog’ were strengthening exploitation in labour relations, in favour of the ‘upper classes’.Almost immediately after Lula’s victory

$)&<PP<7&+"-&_JK%&1.H-#)9-)+&%.;$8$0-8&()8&(9/;$0-8&+"-&$)5.9-W8$%+#$O,+$.)&/#.1#(99-&known as Bolsa Família. This changed the social 01"+&(1($)%+&/.H-#+>&$)+.&(&/#.O;-9&.4&/,O;$5&

D1,>'8,(&);%'3)E(F/'#);%$2)82)7'$"2G)D@#&#4):'/218#)7&%/H,1&

35

Brazil: Limits of a Precarious Development Model

policy management. For De Oliveira, Lula da Silva’s government trivialised poverty by changing it into an administrative issue.

Electoral realignmentReacting to De Oliveira’s provocations, André Singer (2009, 2010) argued that the Bolsa Família programme had in fact ensured the support of Brazil’s most impoverished lower classes for the PT’s plans. According to Singer, as a result of the scandal over the payment of bribes to members .4&!.)1#-%%7&F,;(K%&1.H-#)9-)+&;.%+&%$1)$05()+&middleincome, urbancentre supporters.However, attracted by federal public policies,

the most impoverished sectors of Brazilian voters, who had traditionally distanced themselves from Lula, became more attracted to his government. In a movement known in political science as ‘electoral realignment’ they decided to reelect Lula in 2006.

Poor workers’ consumer desires According to Singer, by satisfying the consumer desires of millions of poor and excluded workers through his federal public policies, ‘Lulism’ was pleasing Brazil’s ‘subproletariat’. These are workers who earn up to 1.5 of the minimum wage. J"$%&;-1$+$9$%-8&+"-&_JK%&5.)H-#%$.)&+.&0)()5$(;&orthodoxy.So, Lula, as leader of a stagnated and impoverished

mass, had managed to create a new social force, which had the potential to become progressive.Where De Oliveira saw the risks of a

widespread depoliticisation of the lower classes O>&F,;(K%&"-1-9.)>7&2$)1-#&$8-)+$0-8&(&+>/-&.4&‘escape for the struggling classes’ implemented

topdown by a ‘son born of the entrails of the North Eastern subproletariat’.To summarise, Brazil’s subproletariat was

%(+$%0-8&?$+"&+"-&1#(8,(;&$9/#.H-9-)+&$)&+"-$#&material conditions, as made possible by Lula’s +?.&+-#9%&$)&.405-D

Lulist hegemonyBoth De Oliveira and Singer have unravelled distinct aspects, albeit complementary ones, of today’s ‘Lulist hegemony’. De Oliveira emphasised the absorption of

social movements, particularly of the trade unionist movements, into the state’s apparatus and into pension funds. Singer focused on the seductive electoral effect of the success of wealth distribution through public policies that have ensured the visible deconcentration of income among those who depend on the fruits of their labour.Furthermore, the extension of the Bolsa

Família programme, together with real increases in the minimum wage and access to mass credit, have interacted with economic growth. This has strengthened the formalisation of Brazil’s labour market. In 2010, labour law protected 54.7% of all service agreements. And the historical peak of formal work attained in the second half of the 1980s was surpassed.However, of those 2,1 million new jobs created

each year, about two million (94%) provide workers with a salary that is only 1.5 times the minimum wage (US$ 500 per month in 2013). It is obvious that these workers are unable to save. In other words, all the money that entered the base of the remuneration pyramid during the last decade was immediately converted into mass consumption.This new consumption pattern is not the

result of productivity made possible by national industrialisation. The truth of the matter is that for the last decade Brazilian enterprises have not seen any real gains in productivity. The new consumption pattern rests mainly on economies of scale ensured by a few economic sectors that largely employ unskilled workers: banking, mining, oil, agro industry and civil construction. The economy has grown at the cost of a

deteriorating processing industry (contributing 27.8% to gross domestic product (GDP) in 1994, and only contributing 14.5% to GDP in 2010).

D#'#12%-"%#$)/0)Bolsa Familia. Photo: http://www.portaldovale.net


36

PostFordist labour dynamicsUntil the middle of the 1990s, the country’s job creation drive focused on creating jobs, which ?-#-&#-9,)-#(+-8&+"#--&+.&0H-&+$9-%&+"-&minimum wage, with industry contributing 40% of new jobs. Then, between 1994 and 2010, labour dynamics changed. The focus was primarily on the services sector: 70% of new jobs were to be found in this sector.Therefore, the mass of unemployed workers

created between 1994 and 2002 was reabsorbed by the services sector, but in underpaid positions (where they earned 1.5 times the minimum wage). This meant that the portion of workers in this salary bracket increased to 60% of all jobs in the country. However, the minimum wage increase +.&(O.H-&+"-&$)G(+$.)&#(+-&%$9/;>&+#()%;(+-8&$)+.&(&toughening of conditions of employment for the labour force.In the decade of 2000, the country’s worker

turnover rate increased by 9% (from 34% in 2001 to 39% in 2010). There was a marked presence of workers at the bottom of the remuneration pyramid. For those earning between 0.5 and 1.5 times the minimum wage, the turnover rate increased to 86% in 2009, which is an increase of 42% as compared to 1999.To make matters worse, between 1996 and

2010 the outsourcing rate increased by 13% per year. In addition, there was a growing 4-9$)$%(+$.)&.4&+"-&;(O.,#&4.#5-D&E.9-)&0;;-8&60% of the vacancies created during the decade of 2000 – at lower wages.There was also an increase in the mass of

salaried young, nonwhite workers (70% of vacancies) and in workers who had completed

their secondary schooling (85% of vacancies). Interestingly, despite all the transformation in the market, the largest Brazilian occupational group – domestic workers – comprising 7,2 million workers, only registered a slight decrease in casual workers, falling from 75% in 1999 to 73% in 2009.Besides the resilience of casual domestic work,

another fact requires attention: the ageing of this labour force. In fact, between 1999 and 2009, the largest age group advanced from the 20–30 to the 40–50 year category.

São Paulo’s call centresThe ageing of the labour force leads us to another story. Attracted by formal work vacancies in the services sector in the 2000s, daughters of domestic workers were employed in the telemarketing sector in their thousands. In fact, this was the sector that employed the largest number of nonwhite women and casual youth during the last decade. This guaranteed them access to social rights, a technical skill and (;;.?-8&+"-9&+.&0)$%"&+"-$#&%+,8$-%&(+&)$1"+&universities. However, the toughening of targets, the routine nature of the work, the despotism of operational coordinators or managers, the low wages, the companies’ total neglect of ergonomics and workplace temperatures, has led to illness and lack of interest in the work. At some stage, a 8$%%(+$%0-8&+-;-./-#(+.#&%+./%&bO#$)1$)1&#-%,;+%KD&This leads to dismissal and replacement by another, who is subjected to the same cycle.Accumulation of experience in the call

centre industry and the insecurity of labour have resulted in workers who are critical of their

Female construction workers, Rio de Janeiro. Photo: Fabiana Frayssinet/IPS

Call centre. Photo: Petiatil

37

Brazil: Limits of a Precarious Development Model

-9/;.>-#%D&e-%/$+-&+"-&8$405,;+$-%&$9/.%-8&O>&the telemarketing sector on collective bargaining, there has been a progressive increase in union activities, especially since 2008. Although trade unions in the sector have supported federal policy to promote the call centre industry, we have nonetheless witnessed frequent strikes in São Paulo’s call centre industry between 2008 and 2011.

Limited concessionsAlthough the recent expansion in credit access and increases in mass consumption have had a positive effect on the president’s popularity, journalists and economic researchers are no longer impressed. A close analysis reveals the limited nature of concessions made to workers by the postFordist development model. After all, the very policy that the federal government has undertaken since 2006, with a view to increasing

the 9$)$9,9&?(1-&(O.H-&+"-&$)G(+$.)&#(+-7&illustrates the precariousness of the remunerated working class in the country. For the purposes of comparison, it is important

to note that the DIEESE (the CUT’s research institution) calculates that the decent minimum wage, which would allow workers to cover basic household expenses such as food, housing, health, education, clothing, transport and leisure, as provided for in the federal constitution, should be US$ 1,300 (September 2012). However, the current (2013) minimum wage is US$ 340. To sum up, the current postFordist

accumulation regime has crystallised into a despotic one, causing general dissatisfaction among the lower classes. Meanwhile workers are 1#.?$)1&+$#-8&.4&+"-&F,;$%+&(//#.(5"&+.&5.)G$5+&resolution. There were widespread interruptions, strikes and worker demonstrations between March 2011 and May 2012 in the civil construction sector. It caused mayhem in many of the projects being carried out under the federal government’s Programa de Aceleração do Crescimento (PAC) (accelerated growth programme).

ConclusionThe current development model has created access to social rights at the cost of low wages and precarious working conditions. The combination of economic growth with federal government public policies has broadened the base of the Brazilian ‘wage pyramid’.The current accumulation process in Brazil

$%&O(%-8&.)&+"-&0)()5$(;&$)8,%+#>7&mining, oil, agribusiness and civil construction. All

‘If the fare doesn’t drop, Rio is going to stop!’ People protesting in the streets, Rio de Janeiro, 2013. Photo: Tânia Rêgo/Agência Brasil

As in South Africa, domestic workers make up a large occupational group in Brazil. Photo: William Matlala


38

these sectors pay low wages, imposing harsh working conditions on workers. The relationship between the ‘Lulism’ (Lulist regulation) and a despotic regime of accumulation is becoming more problematic. It reveals the limits of a development model that is based on cheap and unskilled labour. !

Eds: We thank the South African Labour Bulletin for permission to use the original article, which was published in March/April 2013, 37(1).

References

De Oliveira, F. (2003) Crítica À Razão Dualista/O Ornitorrinco. São Paulo: Boitempo.

De Oliveira, F., Braga, R. and Rizek, C.S. (eds). (2010) Hegemonia Às Avessas: Economia, Política E Cultura Na Era Da Servidão Financeira. São Paulo: Boitempo.

Singer, A. (2009) ‘Raízes Sociais E Ideológicas Do Lulismo’. Novos Estudos Cebrap 85 (Nov).

Singer, A. (2010) ‘A Segunda Alma Do Partido Dos Trabalhadores’. Novos Estudos Cebrap 88 (Nov).

Ruy Braga is an associate professor at the Department of Sociology, University of São Paulo (USP). He was director of USP’s Center for the Studies of Citizenship Rights

(Cenedic) from 2007 to 2010; and the writing secretary of the magazine Outubro (periodical of the Institute of Socialistic Studies) from 2000 to 2012. Together with Marco Aurélio Santana, since 2007, he has coordinated the Working Group of the Brazilian Sociology Society (SBS), Sindicato, trabalho e ações coletivas (union, work and collective actions). Ruy is author of the book A política do precariado: do populismo à hegemonia lulista (São Paulo: Boitempo, 2012), and co-author of the books Por uma sociologia pública (with Michael Burawoy, Alameda, 2009) and Infoproletários (with Ricardo Antunes, Boitempo, 2009), among others.

Protest against the fare increase in public transportation in Natal, Rio Grande do Norte, Brazil, 2013. Photo: Flickr, Isaac Ribeiro

39

CHAPTER 3

BRAZIL: NEW CITIZENSHIP RIGHTS FOR THE POOR

Gay Seidman

The Rocinha favela, the largest favela in Brazil. Photo: Zezinho da Rocinha


40

For the past decade, Brazil’s rapid economic growth has coincided with a steady reduction in extreme poverty for

its citizens. There has also been a remarkable decline in inequality. This has created a new sense of optimism and inclusion in what has long been one of the world’s most unequal societies. The decline in Brazil’s levels of inequality suggests that another world is indeed possible. Across the spectrum, international observers are taking notice.

Astonishing growth patternsThe incomes of the poorest Brazilians have risen much faster than those at the top. Incomes of the working poor are rising to a standard that no one would have imagined, even a decade ago. Between 2009 and 2011, the incomes of the poorest 10% of Brazilians rose by 29%, while the national average rose only 8% (IBGE, 2012). About half of Brazilians were said to have moved into the country’s lower middle class, earning monthly incomes of between US$ 1,000 and US$ 4,000. In a country where the elite political culture

was long captured by the phrase ‘Sabe com quem voce fala?’ (‘Do you know to whom you are speaking?’), Brazil’s shift toward more egalitarian growth patterns has been astonishing. Its success stems from a complicated set of political dynamics and policy choices, shaped by local history and context. Since the early 1990s, Brazil has maintained

relatively high growth, based on expanding exports and attracting investments. When Fernando Henrique Cardoso was elected as president in 1994, he promised to open the economy to global trade and attract more international investment while also offering real support to national industry and agriculture. 34+-#&%,55-%%4,;;>&5.)+#.;;$)1&">/-#$)G(+$.)7&

Fernando Henrique Cardoso oversaw the restructuring of Brazil’s economy. This included privatising state companies and welcoming foreign investors. Brazil’s exports now range from agricultural commodities like oranges and soy to advanced technological exports – from auto parts to airplanes. E"$;-&\#(C$;K%&-5.).9>&O-)-0++-8&4#.9&+"-&

commodities boom in the 2000s, it has weathered +"-&0)()5$(;&5#$%$%&O-++-#&+"()&9()>&-5.).9$-%D&

Even though Brazil’s rates have slowed recently, it continues to expand.

Brazil/South Africa similaritiesBut Cardoso’s macroeconomic policies did not reduce inequality. In the 1990s, growth and globalisation contributed to even sharper inequalities in Brazil, as in so many other countries. Much like South Africa, Brazil’s sharp racial and geographic inequalities were linked to differences between the experiences of urban semiskilled workers, and those of agriculture and informal sector workers. As in South Africa, Brazilian industrial

workers had long pushed for democratisation in a militant labour movement. In fact, Lula got his start as a labour leader in the 1970s in Brazil’s Partido dos Trabalhadores (PT) – the Workers’ Party – whose members were mostly urban factory workers and their families. But in rural Brazil, relatively unskilled workers in agriculture and mining were effectively excluded from unions, and conditions in Brazil’s urban ‘informal sector’ and in agriculture were always precarious. J"(+&/#-5(#$.,%)-%%&$)+-)%$0-8&8,#$)1&

Cardoso’s presidency. At the height of Brazil’s neoliberal restructuring, more and more manufacturing companies hired temporary contract workers, shutting them out of collective bargaining. One study concluded that:

seven out of every ten jobs created in the 1990s were concentrated in only four occupations: domestic workers, hawking, cleaning, and maintenance and security services. Unemployment and the informal economy grew, while employment conditions and relationships became more precarious (Pochmann, 2009:276).

Unsung hero: tax collection Even in the neoliberal 1990s, however, Brazil’s growthoriented policies involved rather more government intervention than is often acknowledged. In addition to investing in infrastructure and education, the government promoted Brazilian investment in new sectors. For example, it supported Brazilian companies making Embraer jets and expanded sugarbased ethanol markets around the world. Brazil stabilised the macroeconomic situation

O>&5.)+#.;;$)1&">/-#$)G(+$.)&()8&$9/#.H$)1&

41

Brazil: New Citizenship Rights for the Poor

tax collection. In fact, tax collection might be the unsung hero of Brazil’s story. Over the past 20 years, Brazil has changed from being an international example of tax avoidance (see Leiberman, 2003) to what might be considered (&9.8-;&.4&-405$-)5>D&*)&QTT<7&(O.,+&QPg&.4&+"-&gross domestic product (GDP) was paid in taxes. By 2002, it was 15.5%, and in 2008, the World Bank reported Brazil had collected 16.7% of its GDP in taxes (World Bank, 2013).

A different path: incomeled growthBut economic growth is only part of the story. In the past 10 years, Brazil has created a new, reliable social safety net for its poorest citizens. In <PPd7&F,;(&5(9-&+.&.405-&/#.9$%$)1&+.&9($)+($)&Cardoso’s macroeconomic policies, and many observers (including myself) assumed that we would see continued inequality and increasing precariousness for workers. We expected to see more of the kind of race to the bottom that governments so often engage in when they seek to attract investors. Instead, the Workers’ Party found a different

/(+"D&J"-&O-)-0+%&.4&1#.?+"&"(H-&O--)&8$%+#$O,+-8&through society in a policy that the International Labour Organization (ILO) describes as ‘incomeled growth’ (International Institute for Labour Studies, 2011). During the growth spurt of the 1990s when Cardoso was president, labour’s share of national income fell. By contrast, during Lula’s presidency, the share of Brazil’s national income that went to labour rather than to business rose steadily (Pochmann, 2009:280). Brazil has reduced poverty through social

programmes that give cash to poor households,

and, even more importantly, by raising wages for workingclass Brazilians. About half of Brazilians have now entered what might be called the lower middle class, thus creating a domestic market for locallyproduced goods. Brazil’s focus on raising incomes for its poor

and workingclass citizens seems to have shifted the country’s economic dynamics. As Giorgio Romano Schutte noted during the roundtable discussion in February 2013, Brazil today looks more like an illustration of a developmental virtuous cycle than a symbol of persistent inequality. Sustained growth has combined with higher wages and created a domestic market for locallyproduced consumer goods. In turn this sustains further economic growth and creates new jobs.

Brazil without miserySince the Workers’ Party took the presidency, national policies have emphasised universal rights and broad socioeconomic inclusion. Policies have been aimed at raising the incomes of lower and middleclass households, and increasing social support to vulnerable citizens. How has that been accomplished? Much international attention has focused on Brazil’s ‘conditional cash transfer’ programmes collectively known under the umbrella term Bolsa Familia. Bolsa Familia are government programmes that provide direct payments to poor households. These were greatly expanded, and by Lula’s second term these grants, which put cash directly into household bank accounts, provided some 60% of household income for many of Brazil’s poorest households. Around 20% of Brazilians lived in households receiving assistance. Brazil has renamed these efforts ‘Brazil

Without Misery’. Like South Africa’s social grants system, the ‘conditional’ cash transfers "-;/&5#-(+-&(&G..#&,)8-#&".,%-".;8&$)5.9-%D&Many international policymakers love the idea of ‘conditional’ programmes that ‘incentivise’ positive behavioural changes among the poor. But Brazilian analysts generally suggest the Bolsa Familia programmes are a crucial part of the government’s effort to build a reliable social safety net for the country’s poorest citizens. Although the programmes in Bolsa Familia often link cash to positive behaviour among the poor, the conditions are so light that the grants can

Favela Vidigal, Rio de Janeiro. Photo: Flickr, Jeff Belmonte


42

be better understood as a meanstested poverty alleviation programme. Conditions include things like rewarding school attendance and regular clinic visits. And the government has also improved poor households’ access to schools, health care, and basic necessities like food and cooking gas (Melo, 2010).Today, Brazil’s government plans to guarantee

an income equalling at least US$ 35 per month for every household member. This is a remarkable shift in a country where insecurity, hunger and hopelessness have long been most citizens’ experience.

H#I$J00/-$&,)#/$minimum wagesCash transfers have addressed the situation of households living in absolute poverty. But for most Brazilians, government programmes aimed at the wages of the working poor have had even greater impact.Since the Workers’

Party took the presidency, government "(%&%-+&)-?&G..#%&,)8-#&minimum wages. It has also expanded pension programmes for poor retired workers, especially in rural areas. Most importantly, Brazil has: ]& 8#(9(+$5(;;>&$)5#-(%-8&+"-&#-(;&H(;,-&.4&Brazil’s legal minimum wage

]& $)5#-(%-8&+"-&H(;,-&.4&/-)%$.)%&+.&.;8-#&Brazilians, especially for poor rural workers who had long been excluded from formal pension schemes

]& 9.H-8&9()>&9.#-&?.#V-#%&4#.9&/#-5(#$.,%&or temporary status into formallyregulated employment contracts.

The real value of the minimum wage, paid to some 47 million Brazilian workers in 2011, has almost doubled through government legislation. \>&+"-&+$9-&F,;(&;-4+&.405-&$)&<PQP7&+"-&#-(;&H(;,-&of Brazil’s minimum wage had increased by some

60%. And it was set to rise even higher in the next few years, through recent legislation linking 9$)$9,9&?(1-&;-H-;%&+.&$)G(+$.)&()8&+.&1#.?+"&in the country’s GDP. For a vast swathe of Brazilian workers,

a legislated increase in the minimum wage translates directly into a wage increase. The impact goes further: the wages of many more

skilled Brazilian workers are also calculated in multiples of the legal minimum wage. So any increase in the minimum wage lifts their incomes as well. Finally, since the value of many governmentpaid O-)-0+%7&$)5;,8$)1&+"-&new universal pensions and unemployment insurance, are linked to the minimum wage, the millions of Brazilians who depend on those payments have also seen their household incomes rise because of the government’s actions (De Melo et al., 2012).The minimum

wage in Brazil has (&%/-5$05&%+(+,%&$)&national discussions. For

decades, the legal minimum has served as a ;-1(;&#-^,$#-9-)+&()8&(;%.&(%&(&).#9(+$H-&G..#&for wages, setting both workers’ and employers’ expectations. In 1940, the Brazilian government $9/;-9-)+-8&)(+$.)(;&;-1$%;(+$.)&;-1(;;>&8-0)$)1&the national minimum wage. This was based on the amount needed to ensure that a fulltime adult worker would earn ‘enough to satisfy… his or her regular needs in terms of food, housing, clothing, hygiene and transportation’. This is an idea that perhaps parallels the South African idea of a ‘living wage’. For decades, the country’s legislators have

H.+-8&-H-#>&4-?&>-(#%&+.&#($%-&+"-&%/-5$0-8&9$)$9,9&%.&+"(+&+"-&?(1-&;-H-;&9(+5"-%&$)G(+$.)7&covering (at least in theory) the basic needs of a workingclass family. For decades, this legislated )(+$.)(;&9$)$9,9&?(1-&"(%&8-0)-8&9$)$9(;&

Striking for a living wage, Hillbrow, Johannesburg, 1990. Photo: Graeme Williams

43expectations for Brazilians seeking work, and for employers seeking workers. Brazilians across the spectrum clearly understand that in raising the ?(1-7&+"-&1.H-#)9-)+&%-+%&(&G..#&,)8-#&?(1-&negotiations, even for workers in the informal sector. Over the decades, however, that minimum

standard has been subject to political manipulation. Conservative governments have #-1,;(#;>&(;;.?-8&$)G(+$.)&+.&-#.8-&+"-&(5+,(;&purchasing power of the minimum wage, while Brazilian labour activists have long viewed minimum wage levels as a key policy tool for increasing labour’s share of the national income. \#(C$;K%&b)-?&;(O.,#K&(5+$H$%+%&0#%+&1($)-8&

widespread popular support when the labour federation’s research wing proved that the 1.H-#)9-)+&"(8&9()$/,;(+-8&$)G(+$.)&$)8$5-%&– effectively cutting the buying power of the minimum wage by about 35% by 1977. Led by a young activist named Luiz Inácio Lula da Silva, Brazil’s unions embarked on a militant campaign to ‘reposition’ the legal minimum wage. This was +"-&;(O.,#&9.H-9-)+K%&0#%+&%+#.)1&5"(;;-)1-&+.&the country’s military dictatorship. About 25 years later, the same Lula led the Workers’ Party to the presidency.

Ripple effects of increasing the minimum wageAs soon as Lula was inaugurated as president, his government moved quickly to raise the minimum wage. More than this, it pushed for legislation ;$)V$)1&+"-&9$)$9,9&?(1-&+.&O.+"&$)G(+$.)&()8&growth in the national economy for the next decade.This legislation had further ripple effects,

(1($)&#-G-5+$)1&+"-&%/-5$(;&/;(5-&+"-&)(+$.)(;&9$)$9,9&?(1-&"(%&$)&%-++$)1&(&G..#&,)8-#&+"-&$)5.9-%&.4&+"-&H-#>&/..#D&X()>&O-)-0+%&$)5;,8-8&in Brazil’s steadilyexpanding social safety net are set at the level of one minimum wage. Since 1993, the pension system has been rolled

out and expanded. Today, the government spends far more money on pensions for poor Brazilians than on ‘conditional’ cash transfer programmes. Any Brazilian over 65 years of age is now entitled to a pension. The pension is legally set at the level of the monthly minimum wage. Like the extension of pensions to black South Africans, which has transformed dynamics in poor households, the extension of pensions to citizens previously excluded from formal pension systems has helped reduce poverty (Bohn, 2011). A government study in 2011 concluded that

Brazil’s decision to raise the minimum wage level accounts for about 66% of the drop in the country’s income inequality. Improved pension and disability payments account for another 22%, and cash transfer programmes for only 12% of the change in Brazil’s h$)$&5.-405$-)+&M*_B37&5$+-8&$)&Berg, 2011).

Enforcing labour laws3;.)1&?$+"&#($%$)1&+"-&?(1-&G..#7&\#(C$;K%&government has increased the budget for enforcing labour laws. Like many societies marked by authoritarian rule and inequality, Brazil has a long history of laws that are not enforced. This situation was exacerbated in the 1990s. Neoliberal restructuring was associated with growing informalisation of the workforce and high unemployment in urban areas. In the mid1990s, a campaign to free workers

held essentially as slaves until they have paid their debts – mainly on rural estates – gained international attention. In the early 2000s, under Lula’s government, the antislavery campaign was

Elderly man outside old-age home, Paraty, Brazil. Photo: Adam Jones, Wikimedia Commons



44

dramatically ramped up. Over 5,000 Brazilians have been freed each year since 2003, reminding Brazilian employers and citizens that even vulnerable rural workers have legal rights.Across the country, Brazil has increased

funding for its labour inspectorate. It has hired new inspectors and linked their salaries to their performance. Janine Berg (2011) suggests that this step has contributed to a steady increase in the percentage of Brazilians employed in the ‘formal sector’. This means that the labour department regulates workplaces; and that employers must pay taxes and contribute to pensions and other social programmes on their workers’ behalf. \>&8-0)$+$.)7&\#(C$;K%&%+-(8>&$)5#-(%-&$)&

formal registration means that more employers are complying with labour laws. In turn, it means more workers have access to social programmes and other protections. While labour law compliance is still not

perfect, several studies suggest that in the past 15 years there has been a real shift in Brazil’s labour department. Brazil’s labour inspectorate has come to view its role as one of helping employers learn how to comply with laws and bring them up to code. But if employers fail to comply quickly, the labour department is quite willing to apply sanctions to punish noncompliance.

Shift in labour department’s cultureInspectors have developed a strong sense of professionalism. They insist that their efforts are not driven by political ideology, but rather by

a clearer sense that enforcement can help both workers and businesses improve their situation. Roberto Pires (2008), for example, suggests that a shift in Brazil’s labour department culture has both improved workers’ conditions and small enterprises’ productivity. When the labour department works well with business and unions, he suggests, compliance raises wages, ensures better health and safety for workers, and can also improve the sustainability of businesses. This is O-5(,%-&$)%/-5+.#%&5()&"-;/&-9/;.>-#%&0)8&)-?&strategies to improve productivity.

Setting minimum wages Minimum wages are set very differently in Brazil and South Africa. Congress sets Brazil’s minimum wage, and it is the same for all workers in all industries, although it does allow for some regional variation. Brazil’s general ;-1$%;(+$.)&$%&8-%$1)-8&+.&%-+&(&)(+$.)(;&G..#&under all wages. Its national standard is set by technocrats who estimate the cost of a family’s basic household expenses. The minimum wage is then implemented through national legislation. By contrast, South Africa’s sectoral minimum wages have historically been established through sectorallevel bargaining; through negotiations between unions and employers. Today, the South African government sets

legislative minima for sectors where workers are not represented by strong unions, or covered by bargaining councils. But most minimum wages (#-&8-0)-8&+"#.,1"&)-1.+$(+$.)%&(+&%-5+.#(;&

National Union of Metalworkers of South Africa in motor sector wage negotiations, Johannesburg, 1998. Photo: William Matlala

45

bargaining councils. Perhaps as a result of the patchwork of sectoral minima, and because +"-%-&9$)$9(&(#-&-:/;$5$+;>&8-0)-8&+"#.,1"&a bargaining process between organised class representatives, South Africa’s minimum wages seem to be perceived very differently to how they are in Brazil. South Africa’s sectoral minima are often

described as the outcome of a bargaining process Z&;$V-&(&%+()8(#8&+"(+&#-G-5+%&+"-&%+#-)1+"&.4&unions in a particular sector. Observers often describe minimum wage negotiations as the result of skilled workers’ pressure rather than seeing +"-&9$)$9,9&?(1-&(%&(&O(%$5&G..#7&.#&(&%+#(+-1>&to protect vulnerable workers from exploitation (compare Nattrass and Seekings, 2013; Boehm and Schirmer, 2010).In Brazil, the nationallylegislated minimum

is taken as the starting point for wages across the country. Most employers and most workers assume that fulltime workers should get at least the basic minimum. Negotiations start 4#.9&+"(+&G..#D&BH-)&8,#$)1&/-#$.8%&.4&"$1"&unemployment, there is wide public acceptance that a governmentestablished norm, once set, 8-0)-%&+"-&G..#&4.#&H,;)-#(O;-&?.#V-#%K&?(1-%D&Of course Brazilian business leaders frequently

warn that if the government raises the minimum wage too far, it risks reducing employment or 5(,%$)1&$)G(+$.)D&\,+&$)&+"-&/(%+&QP&>-(#%&+"-&increase in the minimum wage has coincided with relatively steady growth and steadily increasingly employment. So even those complaints have been muted, or even drowned out by the many Brazilians who have found their incomes and purchasing power rising.

What about South Africa?An ILO paper recently noted that South Africa’s sectoral process is something of an outlier in global minimum wage determination processes (Belser and Sobeck, 2012:109). Instead of treating the minimum wage as a mark of basic decency, South African workers and employers seem to see the minimum wage as something to aspire to; more as the goal of contract negotiations rather than the starting point. As Congress of South African Trade Unions

(Cosatu) policymakers have noted, Brazil’s recent experiences suggest that perhaps South 34#$5(&9$1"+&O-)-0+&4#.9&-%+(O;$%"$)1&(&)(+$.)(;&

minimum wage framed in terms of basic subsistence and social justice, rather than sectoral O(#1($)$)1D&*4&%,5"&(&G..#&?-#-&+.&O-&%-+7&5.,;8&$+&5#-(+-&(&G..#&,)8-#&/..#&".,%-".;8&$)5.9-%i&What kind of public process would ensure such (&).#9(+$H-&G..#&+"(+&9$1"+&1($)&?$8-%/#-(8&awareness and acceptance? F$V-&\#(C$;7&9.%+&5.,)+#$-%&8-0)-&9$)$9(&

with reference to the cost of living. They look to /#.H$8-&(&%/-5$05&O(%V-+&.4&1..8%&Z&4..87&5;.+"$)1&and housing – for a worker, or for a worker and a family. If South Africa were to set a national minimum wage – perhaps through some kind of national commission of experts – would it be possible to set a minimal wage standard that ?.,;8&O-&?$8-;>&(55-/+-8&(%&(&;-1$+$9(+-&G..#i&&What steps might improve compliance with

legal minimum wages in South Africa? Over the past decade, Brazil’s labour inspectors have increasingly tried to work together with employers, bringing even marginal businesses into compliance with labour laws through a combination of carrots and sticks. By contrast South African inspections have been largely left to a patchwork of bargaining council and provincial inspectorates, with few resources and clumsy enforcement powers. Could a more centralised approach, with

a betterfunded, bettertrained and more professional inspectorate, improve compliance? *)&(88$+$.)7&1.H-#)9-)+&9$1"+&0)8&$)5-)+$H-%&+.&offer employers who comply with labour, health and safety laws. Perhaps government could offer easier access to industrial development funds in exchange for complying with what is, after all, a legal requirement?Like Brazil, South Africa inherited stark

inequalities. But even with its high unemployment rates, the government could put more resources into ensuring that workers are protected from employer abuse or underpayment. A strengthened social safety net for South

African citizens could be combined with a renewed insistence that employers comply with minimum wages. In South Africa, as in Brazil, increasing household incomes could stimulate a virtuous cycle, with rising household incomes among the country’s working poor. This could well spur on the domestic economy and lead to further economic growth. !



46

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Boehm, A. and Schirmer, S. (2010) ‘Development by decree: the impact of minimum wage legislation on a farming area in North West Province’, in B. Freund and H. Witt (eds), Development Dilemmas in PostApartheid South Africa. Durban: University of KwaZuluNatal Press.

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Pires, R. (2008) ‘Promoting sustainable compliance’. International Labour Review 147(2–3):199–229.

Pochmann. M. (2009) ‘What Brazil learned 4#.9&;(O.,#&G-:$O$;$C(+$.)&$)&+"-&QTTP%KD&International Labour Review 148(3):269–82.

World Bank. (2013) ‘Tax collection data by country’ <http://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS> (accessed 11 April 2013).

Gay Seidman is the Martindale Bascom professor of Sociology at the University of Wisconsin-Madison, 48@A+B*$+,$&'+C11D7+Manufacturing Militance: Workers’

Movements in Brazil and South Africa, 1970–1985 (University of California Press, 1994), traced the rise of social movement unionism in both countries, exploring the links between new unionism and poor communities as they protest authoritarian rule. Gay’s books and articles since then have generally explored questions relevant to labour, gender, and social movements, especially in Brazil and South Africa. Her current research explores how minimum wage enforcement and social programmes might reduce inequality and create a social safety net in so-called emergent economies.

47

CHAPTER 4

SOCIAL DEMOCRACY AND THE ANC: BACK TO THE FUTURE?

:#I,1&)"2()5',H,1H

Walter Sisulu Square where the ANC’s Freedom Charter was signed, Kliptown, Soweto. Photo: Graeme Williams

The people shall governAll national groups shall have equal rights

The people shall share in the country’s wealthThe land shall be shared among those who work it

All shall be equal before the law

All shall enjoy equal human rightsThere shall be work and security

The doors of learning and of culture shall be openedThere shall be houses, security and comfort

There shall be peace and friendship– The Freedom Charter


48

Social democratic ideas and ideals have been articulated in the African National Congress’ (ANC) policy frameworks since

the 1940s. They’ve included: 1. State provision of universal and socially inclusive education; health, housing and ?-;4(#-&O-)-0+%&+.&(;;&5$+$C-)%&(%&(&#$1"+&.4&citizenship.

2. Full employment as the state’s goal.3. A social compact between labour, capital and government based on the maintenance of a ?-;4(#-&%+(+-&()8&#-%.;H$)1&$)8,%+#$(;&5.)G$5+%&consensually (Sandbrook et al., 2002).

These ideas stretch back to the ANC of Dr A.B. Xuma in the 1940s (in Africans’ Claims), to Albert Luthuli in the 1950s/1960s (in The Freedom Charter), and to the preelection 1990s (the Reconstruction and Development Programme’s (RDP) ‘basedocument’). However they were severely undermined by the neoliberal ideology that pervaded many ANC policies in the post1994 election period. This chapter traces the journey up to today, where the ideas are resurfacing in social policy proposals to establish a national health service.

The roots of social democratic ideas in the ANC Between 1912 and 1952 the ANC attempted to secure citizen rights using nonviolent strategies. At the time the ANC did not have a mass popular base. But it did have support among the educated élite. The ANC was the most articulate advocate of the African middle classes’ political aspirations at the time. Its language and strategy was of moderation and reform; appealing through constitutional routes such as petitions and deputations. When A.B. Xuma was voted president

general in 1940, he brought with him the political $)G,-)5-%&5,;+$H(+-8&4#.9&"$%&9-8$5(;&+#($)$)1&(+&the African American Tuskegee Institute in the United States of America (USA). It was a model of black advancement through selfreliance. It was not isolationist but engaged whites on the basis of independent black organisational and political strengths (Gish, 2000). Other ANC leaders, such as Z.K. Matthews, shared a similar political outlook (Matthews, 1981).j,9(&?(%&(?(#-&.4&+"-&/.+-)+$(;&%$1)$05()5-&

for African advancement in the global struggle against Nazism in Europe, as the following quote highlights:

South Africa has legislated and governed for the O-)-0+%&.4&+"-&B,#./-()%7&+"-&/#$H$;-1-8&1#.,/&()8&upper caste of South Africa. Because she claims +.&O-&01"+$)1&4.#&+"-k&l8-9.5#(+$5mk&$8-(;%&?-&have just mentioned… South Africa must begin ).?&+.&;-1$%;(+-&4.#&+"-&?-;4(#-&()8&O-)-0+&.4&(;;&South Africans irrespective of race, creed or colour but must be based on human worth. Thus and thus only may South Africa win peace. This is Congress Policy. This is the African charter in South Africa (Xuma, 1941, quoted in Karis and Carter, 1987:183).

Xuma promoted his strategy through constitutional methods based on democratically accountable, mandated leadership and building support for political positions through properly constituted political organisation. A new ANC constitution was adopted that democratised the organisation across national, provincial and branch structures. It opened membership to women as equal members; established an administrative structure through subscriptions, and eliminated the House of Chiefs (Davenport, 1991; Lodge, 1983). Xuma also attempted to create a mass campaigning movement of the ANC in favour of a universal franchise (but still within the bounds of constitutional politics). Xuma had expectations that discriminatory

legislation and bars on citizenship would be removed in return for black support for the Allied war effort (Gish, 2000:119). He was particularly interested in improving the livelihoods of Africans in urban areas. He campaigned for egalitarian social policies in education, health, housing and welfare, as well as for a living wage. He was cautiously optimistic in the early war years because the antiNazi Allied world was receptive to ideas about a new democratic world order: a world that was prodemocracy and antiracism; and one which would improve all citizens’ welfare. j,9(K%&/#-%$8-)5>&?(%&%+#.)1;>&$)G,-)5-8&

by his work as a medical practitioner. This was #-G-5+-8&$)&5.)5-#)%&4.#&/,O;$5&"-(;+"&()8&%.5$(;&policies. In 1941, he issued ‘The Policy and Platform of the African National Congress’. Along with the demand for an extension of the franchise and political rights for Africans, it also demanded that the state provide citizens’ rights

49

to education, social welfare, pensions, and public health care (Xuma, 1941, quoted in Karis and Carter, 1987:169). The ANC demands for a preventive health

service run by the state preceded the United Party’s radical Gluckman Commission’s proposals for a national health service in 1944. The Gluckman Commission proposed a socialised and democratically accountable service run by the state and based on the rural preventive health model developed by Sydney Kark, the pioneering public health specialist. This shows a striking convergence in the war years between certain liberal parliamentary members and civil servants of the United Party such as Dr Henry Gluckman, and the policies that Xuma, acknowledged leader of African opinion, advocated.

Africans’ Claims in the new postwar social orderThe Atlantic Charter was an agreement between the two Allied war leaders, Winston Churchill (UK) and Franklin D. Roosevelt (USA), on the need for postwar democratisation and improvement in welfare for societies living under Nazi and fascist occupation. Global democracy and welfare was thus to be the foundation of the new postwar social order. The impact of the international rightsbased Atlantic Charter of 1941, which established the ideological foundations for a future postwar settlement, 8--/;>&$)G,-)5-8&()+$W5.;.)$(;&()8&2.,+"&34#$5()&opposition political movements. The ANC applied the Atlantic Charter’s vision

of political and social citizenship to South Africa in ‘Africans’ Claims in South Africa’.1 ANC leaders such as Xuma and Matthews had already been exposed to a rightsbased discourse through liberal universities in the USA and UK and in the 1930s. They were thus acutely interested in the implications for blacks in South Africa as the Allied leaders, and the USA particularly, advocated for global democratisation in opposition to fascism and Nazism. Africans’ Claims was the ANC’s most

%$1)$05()+&%+(+-9-)+&.)&O;(5V&-)4#()5"$%-9-)+&in the war years. Its strategic genius was to explicitly apply the political, civil and social

1 Atlantic Charter from the standpoint of Africans in the Union.

A.B. N+4-)-()9%$)B/1-(/6')9/4#3)OPHOI):9/(/J)Q+"R#')B29-&#?#"R

Social Democracy and the ANC: Back to the Future?

The Atlantic Charter of 1941.

President Franklin D. Roosevelt (left) and Prime Minister Winston Churchill seated, 1941. Photo: Wikimedia Commons


50

rights advocated in the Atlantic Charter of 1941, endorsed by Union of South Africa’s prime minster Jan Smuts, to the disenfranchised position of Africans in his country. It was on this basis that the ANC argued for black participation in the Allied war effort. This was also a direct rejection of the principles of trusteeship and of colonial rule, which was the basis of Smuts’ ‘native policies’. The section on a Bill of Rights in Africans’

Claims, echoing the American Declaration of Independence, set out the most direct and unequivocal statement of African expectations:

We, the African people in the Union of South Africa, urgently demand the granting of full citizenship rights such as are enjoyed by all Europeans in South Africa (Africans’ Claims, 1943, quoted in Karis and Carter, 1987:217).

The Bill of Rights stipulated what full citizenship meant; and called for state provided social rights, such as the:

… establishment of free medical and health services for all sections of the population; the right of every child to free and compulsory education and of admission to technical schools, universities and other institutions of higher education [and] equality of treatment with any other section of the population in the State social services, the inclusion on an equal basis with Europeans in any scheme of social security and the extension of all industrial welfare legislation to Africans engaged in Agriculture, Domestic Service and in Public institutions or bodies (Africans’ Claims, 1943, quoted in Karis and Carter, 1987:217–22).

The ANC’s Bill of Rights of 1943 contained in Africans’ Claims started from civil rights. These $)&+,#)&;-8&8$#-5+;>&+.&/.;$+$5(;&#$1"+%&()8&0)(;;>&+.&recognition of social rights. The proposals in Africans’ Claims were

consistent with a social democratic discourse that was championed in the 1940s in the UK by the socialist Labour Party. This discourse was based on universalism and interclass social solidarity. It was also based on agreement that poverty and inequality needed to be eradicated – through central state intervention – so that the social needs of all citizens would be met through the universal provision of health, education and welfare as a right of citizenship. It also aimed to maintain ‘full employment’

as an explicit state objective; and to plan the

Left: ‘Africans’ Claims’, published by the ANC, 1943.

Below: Exctract from the ‘Call to the Congress of the People’, Freedom Charter.

This Call to the CONGRESS of the PEOPLE

is addressed to all South Africans, European and NonEuropean.

It is made by four bodies, speaking for the four sections of the people of South Africa: by the African National Congress, the South African Indian Congress, the Congress of Democrats, and the South African Coloured People’s Organisation. It calls you all to prepare to send your chosen spokesmen to:

THE CONGRESS OF THE PEOPLE,a meeting of elected representatives of all races, coming together from every town and village, every farm and factory, every mine and kraal, every street and suburb, in the whole land. Here all will speak together, freely, as equals. They will speak together of the things their people need to make them free. They will speak together of changes that must be made in our lives, our laws, our customs and our outlooks. They will speak together of freedom. And they will write their demands into

THE FREEDOM CHARTER.This Charter will express all the demands of all the people for the good life that they seek for themselves and their children. The Freedom Charter will be our guide to those ‘singing tomorrows’ when all South Africans will live and work together, without racial bitterness and fear of misery, in peace and harmony.THIS IS A CALL for an awakening of all men and women, to campaign together in the greatest movement of all our history.Our call is to you – the People of South Africa. We invite all local and provincial societies, clubs, churches, trade unions, sporting bodies and other organisations to join as partners in the CONGRESS OF THE PEOPLE Committee, and to share the work. Those who are not afraid to speak of freedom will join us. We will welcome them, and work together with them as equals.

OUR CALL IS TO YOU!LET US WORK TOGETHER FOR FREEDOM!

51

economy based on Keynesian economic principles to prevent the cycle of ‘boom and bust’ associated with prewar laissez faire capitalism (Glennerster, 2007). In other words it sought to establish a state guaranteed ‘welfare state’ for the working class as the chief outcome and ‘victory at home’ for the 3;;$-8&+#../%&01"+$)1&(O#.(8&(1($)%+&+"-&1;.O(;&antiwelfare represented by Nazism and fascism. These social democratic proposals came to

fruition with the landslide victory of the Labour Party on a workingclass vote in the 1945 general election. The Labour Party then vigorously pursued its electoral mandate and established a welfare state comprising a free staterun national health service, a universal and comprehensive system of education for all children, comprehensive income maintenance for the nonemployed, quality state housing for the working class, and full employment as a state economic goal. Had Africans’ Claims been fully implemented it would "(H-&;-8&+.&+"-&-%+(O;$%"9-)+&.4&+"-&0#%+&social democratic welfare state in Africa. However for the ANC, led by Xuma, the limits

of liberalisation, and the possibilities of social reform suggested in the early war years, were reached with the publication of Africans’ Claims and its Bill of Rights in 1943. Following repeated failed attempts to secure a meeting with Smuts to discuss the implications of the Atlantic Charter, Xuma sent him a copy of Africans’ Claims and its Bill of Rights. After reading the document Smuts refused to meet Xuma. In 1944 he rejected the proposals of Africans’ Claims (Gish, 2000:128).By that time, the possibilities for developing

and implementing progressive social policies was eclipsed by the rightwing drift of the white electorate, who voted the United Party back into power on a 110seat majority in the July 1943 elections. The Herstigde Nationale Party of D.F. Malan won 43 seats in the election and %$1)$05()+;>&5.)%.;$8(+-8&$+%&%,//.#+&(9.)1%+&Afrikaners. This made it the main opposition party and cut support the United Party had enjoyed from Afrikaner voters (Davenport, 1991:306). The ANC underwent a radicalisation after

the July 1943 general election. There was a 5.)G,-)5-&.4&8-H-;./9-)+%L&(&)-?&9$;$+()+&Africanist nationalism under the stewardship of 3)+.)&F-9O-8-S&()&$)5#-(%-&$)&+"-&$)G,-)5-&.4&trade unionism; and the rise of civil disobedience through squatter movements and bus boycotts.

The Freedom Charter, the ANC and (B(/."#+)$+,$."#$8<=@- To what degree did the idea of a classical welfare %+(+-&(%&-:-9/;$0-8&$)&\#$+($)&$)&+"-&9$8WQTnP%7&underpinned by a universal franchise and government intervention to secure social rights of 5$+$C-)%"$/7&5.)+$),-&+.&$)G,-)5-&ANC thinking after 1948 when the apartheid regime under the National Party (NP) came to power? The effects of NP rule were immediately

evident. There was deterioration in the wellbeing of Africans and increased political repression. J"$%&5.)+#$O,+-8&%$1)$05()+;>&+.&+"-&/.;$+$5(;&polarisation between extraparliamentary opposition groups and the government. In the climate of state repression, signalled

by the draconian Suppression of Communism Act of 1950, social policy became increasingly subordinated to the ANC’s political objective of (5"$-H$)1&()&,)^,(;$0-8&4#()5"$%-D&J"-&/-#$.8&of heightened resistance to apartheid led to a campaign to gather proposals on the form of state that could overcome the legacy of apartheid. This process, in which the ANC was instrumental, culminated in the Congress of the People at Kliptown in 1955 where the Freedom Charter was unveiled and adopted by the Congress of the People.The Freedom Charter contained a series of

‘demands’ framed by the primary citizenship demand that the ‘People shall govern’. In addition to civil and political rights, it contained demands for social rights, including rights related to income maintenance, stateprovided free and universal education, rights to housing and rights to free, stateprovided medical care. The Freedom Charter also contained demands

about the control of wealth. This was based on public ownership and assumed nationalisation as the mechanism to achieve it:

The national wealth of our country, the heritage of South Africans, shall be restored to the people;

The mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole… (Freedom Charter, 1955, in Karis and Carter 1987:206).

The Freedom Charter represented a programme for a postapartheid society. Its goals could not be achieved without an interventionist



52state which could redistribute wealth and resources between the white minority and the black majority. ANC president general Chief Albert Luthuli argued that the Freedom Charter %".,;8&O-&#(+$0-8&(+&+"-&nnth annual meeting in December 1955, and it was. He spoke about his interpretation of the charter:

J"-&5"(#+-#&8-0)$+-;>&()8&,)-^,$H.5(;;>&H$%,(;$%-%&the establishment of a socialistic state. It therefore brings up sharply the ideological question of the kind of state the African National Congress would like to see established in the Union of South Africa.

X>&.?)&/-#%.)(;&;-()$)1%&(#-&+.?(#8%&+"-&9.8$0-8&socialistic state, patterned on the presentday Great Britain, a middleoftheroad state between the extreme ultracapitalistic state as we see it in the United States, and the ultrasocialistic state as we see it in Communist Russia... (Luthuli, 1955:84–5).

The charter’s strong advocacy of social rights and the necessity for state intervention to achieve them made it compatible with the development of a Keynesian welfare state based on the social rights of citizenship. In 1955 the welfare state was still part of a golden era of state intervention to secure social rights in health, education and welfare.

The ruling NP – now under H.F. Verwoerd – saw the charter as a direct challenge to state authority. The government arrested the leadership of all the major political groups that had been involved in the Freedom Charter campaign. Over a period of four years it attempted to prove that the Freedom Charter’s citizenship demands could only be achieved by a violent overthrow of the government. But it failed to prove this and the leadership was released in 1960. The ANC committed itself to a civil

disobedience campaign to force the NP government to agree to a national convention. The NP, having substantially increased its parliamentary majority amongst the white electorate in the 1958 elections, rejected this proposal. It resorted to increased violent repression of political protests, which culminated in the indiscriminate shooting of unarmed antipass law protesters in Sharpeville on 21 March 1960. The government declared a State of

Emergency on 30 March 1960 and effectively outlawed all opposition political activity. It introduced the Unlawful Organisations Act 34 of 1960 which outlawed the ANC and the Pan Africanist Congress (PAC).

:"/(#$(#"$)-R-%'$()(9#)!-$$),-6$)@##)!/,%2#)?+,,#($3)B9-"!#5%,,#3)OPSGI):9/(/J)/',=9&6-,,!-!#"$I2/4

53

The end of dialogueThe banning of the ANC ended all bases for dialogue with the government. It now focused its energies on overthrowing white minority rule – including through armed struggle. In 1962 Chief Albert Luthuli reiterated the ANC’s primary objective to establish a democratic state based on a universal franchise. He continued, however, to reiterate that postapartheid South Africa would be based on social democratic ideas. In 1962, Luthuli included nationalisation as a

mechanism for the state to achieve its social goals, and the extension of state control ‘to cover the nationalization of some sectors of what at present $%&/#$H(+-&-)+-#/#$%-D&*+&?$;;&-9O#(5-&%/-5$05(;;>&monopoly industries, the mines and banks, but excluding such institutions as building societies’. He said:

I realize that a state such as I visualize – a democratic social welfare state – cannot be born in one day. But it will be the paramount task of the government to bring it about and advance it without crippling industry, commerce, farming and education (Luthuli, 1962).

The discourse within the ANC between 1940 and 1962 on a future state that could overcome the legacies of segregation and apartheid was premised on a democracy that would intervene in the economy to secure redistributive social policies in health, education and welfare (income maintenance). This was largely the classic ‘welfare state’; a state which was interventionist and used the powers of government to ensure full employment. It would give effect to postwar social policies for a national health service, free comprehensive education and a nonstigmatising system of social security (Timmins, 1995).When the ANC was banned between 1960 and

1990 the struggle to achieve a democratic state based on universal franchise took priority over further discussions relating to inclusive social policies for a postapartheid welfare state.

!"#$8<<@-9$."#$DHK1-$/+-#$(,)$)#4'+,#$of social democratic ideasAfter the ANC’s unbanning – and the formal ending of hostilities in 1990 – a new period of social policymaking followed. The Convention for a Democratic South Africa (Codesa) was the

forum for negotiations between all parties seeking a new dispensation. The NP and ANC were the chief protagonists during the negotiations, which took place between 1991 and 1993.The negotiations created the conditions for

a dialogue over the values and principles which should underpin social and economic policies, and by extension social rights, in a postapartheid South Africa. The extension of rights was a given. But the principles and values that would inform the new policies were subject to extensive debate. The period between 1990 and 1993, before the democratic elections, consisted of contestation over the values and principles that should inform the postapartheid state. The principles underpinning the social policies

of the new NP were ‘residualist’ (the state should be the last resort for meeting social needs after the private sector, the family and charity) and ‘neoliberal’ in character. A neoliberal approach meant individuals would have to secure health and welfare for themselves. It promoted the introduction of marketbased principles into public health and welfare services, as well as the privatisation of services. This thinking was #-G-5+-8&$)&+"-&(/(#+"-$8&9$)$%+#>&.4&"-(;+"K%&National Policy for Health Act 116 of 1990. The NP attempted to implement health and

welfare proposals consistent with a neoliberal approach. The ANC with its allies, the Congress of South African Trade Unions (Cosatu) and organisations from the antiapartheid civil society movement developed a set of social policy proposals based on the Freedom Charter. The proposals contained the most authoritative statement on its postelection economic and social


Convention for a Democratic South Africa (Codesa), 1991. Photo: Graeme Williams


54

policies. These consisted of the right to stateprovided health, welfare and education with an economic strategy of redistribution with growth. This was written up into the RDP ‘base document’.

Vision for postapartheid South Africa*)&QTTn7&(&4-?&9.)+"%&O-4.#-&+"-&0#%+&8-9.5#(+$5&elections, the ANC issued the RDP as a ‘base document’. The RDP’s introduction established the orientation and intentions of a postapartheid government led by the ANC, as follows:

A.&/.;$+$5(;&8-9.5#(5>&5()&%,#H$H-&()8&G.,#$%"&$4&the mass of our people remain in poverty, without land, without tangible prospects for a better life. Attacking poverty and deprivation must therefore O-&+"-&0#%+&/#$.#$+>&.4&(&8-9.5#(+$5&1.H-#)9-)+&(ANC, 1994:4).

The document argues that development does not proceed from economic growth, but that the former is integral to the latter:

Growth... is commonly seen as the priority that must precede development. Development is portrayed as a marginal effort of redistribution to areas of urban and rural poverty. In this view development is a deduction from growth. The RDP breaks decisively with this approach... [Where] growth occurs, how sustainable it is, how it is distributed, the degree to which it contributes to building longterm productive capacity and human resource development, and what impact it has on the environment, are the crucial questions when considering reconstruction and development (ANC, 1994:6).

The RDP located an interventionist role for the government in the economy. It stated that:

the democratic government must play a leading and enabling role in guiding the economy and the market towards reconstruction and development... with a dynamic balance between government intervention, the private sector and the participation of civil society (ANC, 1994:80).

It further argued for a strong role for public sector investment, including nationalisation as an option to achieve an expanded public sector:

<=$,$(7.94(>$(0(9!?"!:50"4(,'/$(@',(;.>/!5(9$54',(investment to complement the role of the private sector and community participation in stimulating reconstruction and development. The primary question in this regard is not the legal form that government involvement in economic activity might take at any point, but whether such actions must strengthen the ability of the economy to respond to the massive inequalities in the country, relieve the material hardship of the majority of the people, and stimulate economic growth and competitiveness...In restructuring the public sector to carry out national goals, the balance of evidence will guide the decision for or against various economic policy measures. The democratic government must therefore consider: increasing the public sector in strategic areas through, for example, nationalisation, purchasing a shareholding in companies, establishing new public corporations or joint ventures with the private sector... (ANC, 1994:80).

With healthcare policy, the RDP advocated that the priority was to combine all roleplayers into the national health service, based on the ‘complete transformation’ of the delivery system; and that it should have a primary healthcare approach.

Left to right: Raymond Mhlaba, Chris Hani, Joe Slovo, 1991. Photo: Graeme Williams

The proposed National Health Insurance (NHI) system reconnects with the ANC’s ‘strategy of equality’. Photo: Graeme Williams

55

The mechanism to achieve the transformation $)&"-(;+"&5(#-&()8&?-;4(#-&?(%&O(%-8&.)&(&0%5(;;>&redistributive framework. This meant a shift in the budget allocation from curative hospital services towards primary health care. It would be achieved through reallocating staff and budgets to district health care. With social security and social welfare, the

RDP argued that the problems of welfare inherited from the apartheid era could not be resolved through limited reforms of the current social welfare system. The aim was to:

transform the existing social welfare policies, programmes and delivery systems so as to ensure basic welfare rights are provided to all South Africans, prioritising those who have been historically disadvantaged (ANC, 1994:52).

The objective was to establish a comprehensive, nonracial, unitary and democratic welfare system to facilitate local economic development through circulation of social grants in local impoverished communities. The economic and social policy proposals

in the RDP ‘base document’ suggested a neoKeynesian strategy of development, where the state intervenes to ensure economic growth, and that citizens’ social needs are met. The RDP social policy proposals were based on an ethic of social justice and acknowledgment of

constitutionally guaranteed social rights. They were compatible with a social democratic welfare %+(+-D&3)8&+"->&#-G-5+-8&5.)+$),$+>&$)&+"$)V$)1&from the 1940s through to the 1950s on the need for an interventionist state that prioritised social policy and established economic mechanisms to implement them.Nelson Mandela represented this opinion to the

International Press Institute in February 1994, two 9.)+"%&O-4.#-&+"-&0#%+&8-9.5#(+$5&elections:

We are convinced that left to their own devices, the South African business community will not rise to the challenges that face us. The objective of our policies is to create employment as our highest priority. While the democratic state will maintain and develop the market, we envisage occasions when it will be necessary for it to intervene where growth and development require such intervention (Mandela, 1994b).

How the RDP agenda was compromisedThis agenda was compromised by an emerging 8$%5.,#%-&.4&0%5(;&()8&.#1()$%(+$.)(;&5.)+($)9-)+&in the ANC as it contemplated the delivery expectations it would face when it came into government. The RDP agenda was also compromised by the form of accommodation made with organised business, to preserve a


A new township outside Johannesburg receives electricity, 1995. Photo: Graeme Williams


56

marketbased economy underpinned largely by laissezfaire economic principles. In the 1980s organised business realised that

apartheid had become unsustainable and, with the legitimation of black trade unionism following the Wiehahn recommendations in 1979, business would bear the costs of politicised trade unionism unless ‘meaningful political reform’ was pursued (Parsons, 2007:5). This spurred a number of interventions by

organised business in the economic and social policy debates. The 1992 Nedcor/Old Mutual scenario ‘South Africa: Prospects for a Successful Transition’, prepared by key business leaders and associated consultants working in social sectors such as -8,5(+$.)7&?(%&$)G,-)+$(;&$)&4(5$;$+(+$)1&the gradual convergence between the economic and social policy positions in the early 1990s of the ANC on the one hand, and the private sector on the other (Segal, 2007). The National Economic Forum, the precursor

to the post1994 peaklevel social dialogue institution, the National Economic Development and Labour Council (Nedlac) was established in 1992. It consolidated the emerging convergence between the apartheidera government, organised labour, business (including the Chamber of Mines and the Chamber of Business) and the opposition movements, including the ANC, on the economic fundamentals of the postapartheid transition: a

marketbased reform of the apartheid political economy (Van der Westhuizen 2007:240). This ?(%&+.&"(H-&%$1)$05()+&$9/;$5(+$.)%&4.#&%.5$(;&policy.

!"#$/+-#$02$3-4('$40,-#/F(.+-*$(,)$decline of a ‘welfare state’ J"-&-9-#1-)5-&.4&(&0%5(;;>&5.)%-#H(+$H-&(//#.(5"&to economic policy in the ANC was apparent by the end of 1993. The Transitional Executive Council, a joint governing authority of the NP and ANC established to oversee the transition to democracy in 1994, concluded a loan agreement with the International Monetary Fund (IMF) for US$ 850 million in November 1993 (Padayachee, 1997:32). Glenn Adler and Edward Webster argued that

this loan agreement was evidence that the ANC had abandoned a redistributive ‘leftKeynesian’ project. They cite the terms of the loan, which included a commitment to contain government expenditure, cap the debt to gross domestic product (GDP) ratio in subsequent years, and not to raise taxes (Adler and Webster, 1998:364).After the 1994 democratic elections,

disagreements emerged. These were between a 0%5(;;>&5(,+$.,%&3A!7&).?&"-(8&.4&(&9,;+$/(#+>&Government of National Unity (GNU), and its more radical alliance partners, Cosatu, the

First post-apartheid cabinet, 1994. Photo: Courtesy Jay Naidoo

57

South African Communist Party (SACP) and civil society groups. The disagreements were over which strategy would be the best to rectify the poor economic conditions inherited from the apartheid era. The new GNU led by Nelson Mandela was concerned about government’s ability to implement the RDP. The ANC decided to revise its preelection economic policy.According to Jonathan Michie and Vishnu

Padayachee (1997) the economic conditions in which the Mandela administration revised its macroeconomic policy included four areas relevant to social policy:1. There was a decline in GDP in relation to population growth.

2. Labour absorption in the formal economy declined to less than 40% in 1994; and net job creation was wholly inadequate to meet demand.

3. There were acute disparities in wages and income levels. Whites received 59% of income share despite making up only 13% of the population. Africans received 30% of the income share even though they made up 76% of the population.

4. The outgoing NP government had presided over a total national debt to GDP of 53% in 1994.

This macroeconomic context of declining growth, wage and income inequalities, rising unemployment and high levels of poverty was set against the government’s priority objective to meet the basic needs of the majority disadvantaged by apartheid. The gradual distancing of the ANCled GNU from the preelection macroeconomic policies advocated by Cosatu, the SACP and civil society groups became evident in the emergence of a 5#--/$)1&0%5(;&5.)%-#H(+$%9&$)&1.H-#)9-)+&pronouncements and policy statements. J"$%&?(%&#-G-5+-8&$)&_#-%$8-)+&Nelson

Mandela’s State of the Nation address to the Houses of Parliament in 1994. He committed the government to ‘existing programmes of 0%5(;&#-"(O$;$+(+$.)KS&+.&5.)+($)$)1&b#-(;&1-)-#(;&government consumption’; and to ‘manage the O,81-+&8-05$+K&%.&+"(+&$+&?(%&5.)%+()+;>&#-8,5-8&(Mandela, 1994c).J"$%&5#--/$)1&0%5(;&5.)%-#H(+$%9&1#(8,(;;>&

hardened in the government’s ‘White Paper for

Reconstruction and Development – Discussion Document’, which was released in September 1994. Proposals for nationalisation and state intervention in the economy found in the original RDP ‘base document’ were either dropped or moderated.Whilst retaining the broad principles of

the original RDP ‘base document’, the White _(/-#&$)+#.8,5-8&(&)-?&;()1,(1-&.4&0%5(;&(,%+-#$+>D&*+&#-G-5+-8&+"-&$)G,-)5-&.4&8$%5.,#%-%&originating from the World Bank using phrases such as ‘affordability’, ‘cost containment’; and mechanisms such as privatisation (‘sale of state assets’) and ‘user charges’ as key objectives of government economic policy.The White Paper limited expenditure

on the RDP to ‘savings’ from government departments which would be placed in an RDP fund. The actual RDP funds assigned from such ‘savings’ by the White Paper were a mere 2% portion of the total government budget in 1994/95 (Blumenfeld, 1997:73). Even with the doubling in expenditure in subsequent years, the RDP budget formed a small part of total government expenditure. In the 1994/95 budget, R2,5 billion was allocated to the RDP fund. This amount increased to R5 billion in 1995/96 and progressively increased to R10 billion in 1997/98, and R12,5 billion thereafter (RSA, 1994:para 3.3.6). Institutionally, an RDP ministry run by the

minister without portfolio (actual title) was established in the presidency. Its task was to implement the RDP provisions through $)G,-)5$)1&1.H-#)9-)+&8-/(#+9-)+%K&O,81-+%&and funding special Presidential Lead Projects in health, school feeding, rural water provision and infrastructure development.The RDP ministry experienced a number of

management failures and, after slow delivery ?(%&$)5.#/.#(+-8&$)+.&+"-&.405-&.4&+"-&8-/,+>&president under Thabo Mbeki in 1996. Alan Hirsch (2005) argues convincingly that the RDP .405-&?(%&).+&(O;-&+.&$9/;-9-)+&$+%&9()8(+-&because its functions overlapped with that of +"-&8-/(#+9-)+&.4&0)()5-&Me.YRD&3)8&$+&?(%&viewed as imposing on the line functions of other government departments. Its failures notwithstanding, the incorporation of the RDP ministry can be seen as the decline of a redistributive social democratic agenda and the



58consolidation of an economically conservative neoliberal development path. Jay Naidoo, the RDP minister felt this shift

at the time: ‘I gradually began to realize that a change in our political culture was taking place’ (Naidoo, 2010:240).

Going with GearAfter the RDP ministry closed in 1996, redrafting new economic policy began in earnest under the auspices of Thabo Mbeki with Trevor Manuel as 9$)$%+-#&.4&0)()5-D&h.H-#)9-)+&,)H-$;-8&$+%&)-?&economic strategy in 1996 called the Growth, Employment and Redistribution (Gear) strategy. The Gear strategy prefaced its macroeconomic policy proposals with a continued commitment to the goals of the original RDP and the longerterm objectives of a competitive fastgrowing economy, ?"$5"&5#-(+-%&%,405$-)+&I.O%&4.#&(;;&?.#V&%--V-#%S&a redistribution of income and opportunities in favour of the poor; a society in which sound health, education and other services are available to all; and an environment in which homes are secure and places of work are productive (DoF, 1996:1).

The strategy to achieve these goals was twofold: QD& X($)+($)&$)+-#)(;&0%5(;&#-%+#($)+&+.&#(/$8;>&-;$9$)(+-&+"-&1.H-#)9-)+&8-05$+&?"$;-7&simultaneously, restructure and reprioritise the existing national budget to meet social needs.

2. Implement economic reforms to facilitate a globally competitive exportled growth path that would grow the economy by 6% and create 400,000 jobs annually (DoF, 1996).

J"-&%/-5$05&5.99$+9-)+%&#-1(#8$)1&0%5(;&#-%+#($)+&$)5;,8-8&+"-&#-8,5+$.)&.4&+"-&0%5(;&8-05$+&+.&dg&.4&GDP by the year 2000. This -)+($;-8&(&%$1)$05()+&#-8,5+$.)&$)&1.H-#)9-)+&social expenditure. The Financial and Fiscal Commission (1998:21) made the point, for example, that Gear achieved only a 3% growth in GDP in 1996 and that there would therefore be slower growth in revenue and fewer resources for government spending.During the time that the Gear strategy

was introduced a series of labour laws were promulgated. More categories of workers became eligible for unemployment insurance; and lower paid workers, such as domestic workers, were included in unemployment schemes (Nyman, 1997). These far reaching labour reforms revealed +"-&#()1-&.4&$)5;,%$.)(#>&$9/-#(+$H-%&$)G,-)5$)1&government policy in the 1990s. They were $)G,-)5-8&O>&+"-&;(O.,#&9.H-9-)+7&?"$5"&?(%&against an orthodox neoliberal agenda.J"-&0%5(;&(##()1-9-)+%&.#$1$)(;;>&)-1.+$(+-8&

at Codesa between 1990 and 1993 gave provincial governments control of social spending without ringfencing funding for health or welfare. At the same time policy development and coordination was reserved for national government. The new post-;-5+$.)&3A!&1.H-#)9-)+&-9/"(%$%-8&0%5(;&containment in its policy pronouncements after it (%%,9-8&.405-D&The departure from the redistributive

()8&0%5(;;>&-:/()%$H-&/.;$5$-%&(8H.5(+-8&$)&the preelection RDP ‘base document’ was #-G-5+-8&$)&+"-&)-?&0%5(;;>&(,%+-#-&-5.).9$5&policy framework, Gear. It privileged economic stability and growth as a precondition of social development in the postapartheid era. This shift represented a departure from the principles enunciated in the ANC’s preelection manifesto. The policies set out in the manifesto explicitly

Protest march during the World Summit, Johannesburg, September 2003. Photo: Graeme Williams

59

pledged equitable redistribution through social policies. These policies were seen not only as forms of consumption, but also a means of social investment. They emphasised social rights to health, welfare and education – policies compatible with a social democratic welfare state. The effects of the neoliberal agenda were felt

$)&H(#$.,%&9.8$0-8&4.#9%&,)+$;&+"-&<PP[&2+#(+-1>&and Tactics2 document in which the ANC referred to social democracy by name. The document asserted:

The ANC therefore seeks to build democracy with social content. Informed by our own concrete conditions and experiences, this will, in some #-%/-5+%7&#-G-5+&-;-9-)+%&.4&+"-&O-%+&+#(8$+$.)%&.4&social democracy, which includes a system which places the needs of the poor and social issues such as health care, education, and a social safety net at the top of the national agenda; intense role of the state in economic life; pursuit of full employment; quest for equality; strong partnership with the trade union movement; and promotion of international solidarity (cited in PotgieterGqubule, 2010:111).

The ANC’s decisive Polokwane conference in 2007 adopted this document, heralding a new inclusive, universalist policy agenda but one which remains unrealised – partly due to neoliberal orthodoxy having been embedded in government institutions, and the resilience of capital in maintaining a laissezfaire form of capitalism.

And now back to social democracy basics?The lessons from the history of thinking within the ANC on alternative state forms is that an interventionist state is required to ensure that the social rights of citizenship are not subordinated to economic imperatives but rather inform economic arrangements. The abandonment of Luthuli’s vision

of a social democratic welfare state begs a response after almost 20 years of postapartheid

2 See ANC 52nd National Conference 2007 ‘Building a National Democratic Society [Strategy and Tactics of the ANC]’ revised draft August <http://www.anc.org.za/ancdocs/policy/2007/conference/tactics.html> and ANC National Policy Conference June 27–30 2007 ‘Commission Reports and Draft Resolutions, Social Transformation’ <http://www.anc.org.za/ancdocs/policy/2007/conference/ social.html>.

democracy. Such a response seems to be emerging in the current debate on the need for a National Health Insurance (NHI) system, championed by the national department of health. The plan reconnects with the ANC’s ‘strategy of equality’ in that it seeks to create a national health service that is universally available to all citizens regardless of class, race and colour; one that is based on crossclass social solidarity. The NHI would not be based on an insurance model; it will be predominately tax funded. The values and principles underpinning the NHI proposal – universalism and social solidarity – are those of the classic social democratic welfare state.J"-&1#(8,(;&8$9$)$%"$)1&.4&0%5(;&5.)+($)9-)+&

as a primary imperative guiding government social policy is noteworthy. It means a greater range of policy possibilities and opportunities can be explored to establish a comprehensive system of social security. Whether these possibilities are O-%+&5.8$0-8&$)&+"-&"$%+.#$5(;&$8-(;&.4&(&%.5$(;&democratic welfare state is subject to contestation. The battle of ideas looms large in the ANC. !

Robert van

Niekerk’s area of research and teaching is in the institutional history, ideologies and understandings of social policy and social change in

South Africa. He also has an interest in social policy in a post-apartheid South Africa – particularly polices aimed at overcoming inequality and developing social rights of citizenship and the ‘good society’; and looking at the factors that account for success and failure in policy implementation. Robert acknowledges the contrasting insights of the social theorists Richard Titmuss and Harold Wolpe as 'E*+31&'+&!-"!,)%"'+!"'*00*)'(%0+!"F(*")*&+on his thinking on social policy and social change in South Africa. Robert is director of the Institute of Social and Economic Research (ISER), Rhodes University in Grahamstown.



60

References Adler, G. and Webster, E. (1999) ‘Towards a class compromise in South Africa’s “double transition”: bargained liberalisation and the consolidation of democracy’. Politics and Society 27(3).

ANC. (1994) The Reconstruction and Development Programme. Johannesburg: Umanyano Publications.

Blumenthal, J. (1997) ‘From icon to scapegoat: the experience of South Africa’s Reconstruction and Development Programme’. Development Policy Review 15(1):65–91.

Davenport, R. (1991) South Africa: A Modern History 4th edition. Basingstoke: Macmillan Press.

DoF. (1996) Growth, Employment and Redistribution: A Macroeconomic Strategy.

Financial and Fiscal Commission. (1998) Public Expenditure on Basic Social Services: An FCC Report for UNICEF and UNDP. Pretoria: Government Printers.

Gish, S. (2000) Alfred B. Xuma: African, American, South African. New York: New York University Press.

Glennester, H. (2007) British Social Policy 1945 to the Present 3rd edition. Oxford, Blackwell Publishers.

Hirsch, A. (2005) Season of Hope: Economic Reform under Mandela and Mbeki.Pietermaritzburg: University of KwaZuluNatal Press.

Karis, T. and Carter, G.W. (1973) From Protest to Challenge: A Documentary History of African Politics in South Africa 1882–1964, Volume 2: Hope and Challenge 1935–1952. Stanford University: Hoover Institution Press.

Lodge, T. (1983) Black Politics in South Africa since I945. London and New York: Longman.

Luthuli, A. (1955) ‘The implications of the Freedom Charter’, in G.L. Pillay (ed), Voices of Liberation, Volume One, Albert Luthuli. Pretoria: Human Sciences Research Council.

Luthuli, A. (1962) ‘What I would do if I were prime minister’. Ebony (February).

Mandela, N. (1994a) Long Walk to Freedom. New York: Little Brown and Company.

Mandela, N. (1994b) ‘Nelson Mandela’s address to the International Press Institute Congress Cape Town, 14 February 1994’ <http://www.anc.org.za/ ancdocs/history/mandela/1994/>.

Mandela, N. (1994c) ‘State of the Nation address by the President of South Africa, Nelson Mandela, Houses of Parliament, Cape Town 24 May 1994’ <http://www.anc.org.za/ancdocs/history/mbeki/2004/tm0206.html>.

Matthews, Z.K. (1981) Freedom for My People: The Autobiography of Z.K. Matthews: Southern Africa 1901–1968. London: Rex Collings.

Michie, J. and Padayachee, V. (1997) ‘South Africa’s transition: the policy agenda’, in J. Michie and V. Padayachee (eds), The Political Economy of South Africa’s Transition. London: Dryden Press.

Naidoo, J. (2010) Fighting for Justice: A Lifetime of Political and Social Activism. Johannesburg: Picador Africa.

Nyman, R. (1997) ‘Labour reform: addressing women’s needs?’ Agenda 35.

Padayachee, V. (1997) ‘The evolution of South 34#$5(K%&$)+-#)(+$.)(;&0)()5$(;&#-;(+$.)%&and policy: 1985–95’, in J. Michie and V. Padayachee (eds), The Political Economy of South Africa’s Transition.

Parsons, R. (2007) ‘The emergence of institutionalised dialogue in South Africa’. South African Journal of Economics 75(1).

PotgieterGqubule, F. (2010) ‘Social democracy’, in B. Turok (ed), Social Democracy in the Historical Roots of the ANC. Johannesburg: Jacana.

RSA. (1994) ‘White Paper for Reconstruction and Development – Discussion Document’ <http://www.anc.org.za/ancdocs/policy/white.html#conclusion>. Pretoria: Government Printer.

Segal, N. (2007) Breaking the Mould: The Role of Scenarios in Shaping South Africa’s Future. Stellenbosch: Sun Press

Statistics South Africa. (2007) ‘Labour Force Survey’. Statistical release P0210.

Sandbrook, R., Edelman, M. and Heller, P. (2002) Social Democracy in the Global Periphery: Origins, Challenges, Prospects. Cambridge: Cambridge University Press.

Timmins, N. (1995) The Five Giants: A Biography of the Welfare State. London: Harper Collins.

Van der Westhuizen, C. (2007) White Power and the Rise and Fall of the National Party. Cape Town: Zebra Press.

61

CHAPTER 5

A LULA MOMENT FOR SOUTH AFRICA: SEARCHING FOR SUGAR MAN?

J#,$)5,&>@'&,(3@,

RDP housing, Ekurhuleni Metropolitan Municipality, 2012. Photo: Steve Topham


62

Pursuit of South Africa’s ‘Lula Moment’ is like searching for Sugar Man. As with +"-&%,OI-5+&.4&+"-&8.5,9-)+(#>&0;9&(O.,+&

US musician Sixto Rodriguez, we have to ask whether the Lula Moment is still alive in Brazil; and whether the notion itself still enchants and excites. Brazil’s unique positive achievements in

addressing inequality – quite unusual in the current global experience – should not be underplayed. However, when we interrogate whether what Brazil did can be applied to South African conditions, we need to look at the whole picture. Almost all South Africans agree that the country’s ideal should be to achieve not only high economic growth, but also social equity. Like with Brazil during Luiz Inácio Lula da

Silva’s second term (2007 to 2010), we seek to do this in a global context of ‘trickleup’ economics, with growing inequality virtually everywhere.

Growing inequality globallyAccording to Brian Groom,1 pretax income of the top 1% in the USA was 8% of national income in 1974. This grew to 18% by 2008. The package of a FTSE 100 chief executive was about 47 times that of an average employee in 1998. By 2010 it had grown 120 times. Brazil’s experience in reducing inequality is

even more instructive if we take the example of socialist China. While it has extricated hundreds of millions out of poverty in the past 30 years, income inequality continues to ratchet up. It is estimated that the h$)$&5.-405$-)+7&(&

measure of income inequality, rose from nearzero to 0.474 in 2012; while researchers at the Southwestern University of Finance and Economics in Sichuan province argue that it is closer to 0.61. This places China among the most unequal societies in the world (Rabinovitch, 2013). Estimates put South Africa’s h$)$&5.-405$-)+&

at 0.68, arguably the secondmost unequal society globally. This is besides the 25% rate of unemployment and the fact that individuals in about 39% of households live below the Poverty Datum Line of R419 per person per month in 2009 prices.

1 Financial Times (28 July 2011).

Lula Moment’s context What then is the context within which the Lula Moment played itself out? Understanding this contextual dynamic is critical so that we avoid simplicity and selectivity, by putting forward a kind of ‘knightinshiningarmour’ approach. Two issues stand out in this regard. Firstly, as

Karl Marx asserts:

men make their own history, but they do not make it as they please; they do not make it under selfselected circumstances, but under circumstances existing already… 2

Indeed, it is of much relevance that during President Lula’s second term, global gross domestic product (GDP) was growing at close to 4% on average per year. The major locomotives of this growth, China

(10%) and India (8%) were also gobbling up commodities that Brazil has in abundance. There were also expanding opportunities in Latin America itself and Africa. In other words, Brazil’s economic performance of about 4.3% per year in that period cannot be divorced from the dynamics of the global economy. Secondly, it would not be correct to pose a

complete disconnect between economic policies of Lula’s 0#%+&()8&%-5.)8&+-#9%7&()8&O-+?--)&macroeconomic and microeconomic policies. Again to borrow from Marx:

… just as they seem to be occupied with revolutionizing themselves and things, creating something that did not exist before, precisely in such epochs of revolutionary crisis [men, Ed] anxiously conjure up the spirits of the past to their service… 3

According to researchers of the Global Labour University, during its second term the Lula government took:

a different position on economic growth, despite the continuity in the macroeconomic policy O(%-8&.)&$)G(+$.)&+(#1-+%7&/#$9(#>&%,#/;,%&$)&+"-&1.H-#)9-)+K%&O,81-+&()8&+"-&/.;$5>&.4&G.(+$)1&exchange rates (De Andrade Baltar, 2010).

Some argue that it is precisely because of

2 See The Eighteenth Brumaire of Louis Bonaparte <http://www.marxists.org/archives>.

3 Ibid.

63

A Lula Moment for South Africa: Searching for Sugar Man?

T%/)&#)Q-'#%"/)$,+4)/')9%,,);"%R9(>)-'&)(9#)4/"#)-0@+#'()'#%R9?/+"9//&3)B-'(-)8#"#$-3)/')(9#),#0(I)89#)Cristo Redentor statue is in the top left. Photo: chensiyuan, Wikimedia Commons

Langrug informal settlement, Stellenbosch, October 2013. Photo: Steve Topham

Searching for Sugar Man+!&+%+.1)(3*"'%$>+3(&!)+,03+$*0*%&*.+!"+GHIGA+J'+'*00&+E1=+two die-hard South African fans of US songwriter and musician Sixto Rodriguez decided '1+,".+1('+=E*'E*$+'E*+$(31($+'E%'+K1.$!-(*L+E%.+.!*.+=%&+'$(*A+ME*>+*/*"'(%00>+#1(".+him alive and he was surprised at the rumours. A construction worker and building restorer by trade, Rodriguez’s songs are mostly about the rough conditions facing working-class people in his city, Detroit, USA. The title for the documentary comes from one of his songs called ‘Sugar Man’. Rodriguez’s music became very popular mostly amongst white South Africans in the 1970s. But it never took off in the USA. Rodriguez has since come to South Africa several times playing to sold-out concerts.


64+"-&0%5(;&%,#/;,%&$)&/(#+$5,;(#&+"(+&+"-&\#(C$;$()&government was able to expand access to social grants and stimulate economic growth in general, but also in small towns. Thus the approach was not one of ‘rightleft’ ideological polarity; but of logic and sensibility.

Lessons for South Africa from Brazil Of the many lessons in the Brazilian experience, +?.&%+()8&.,+D&J"-&0#%+&()8&9.%+&+(;V-8&(O.,+&$%&the social grants system Bolsa Familia and its conditions.2.,+"&34#$5()%&(#-&;$V-;>&Z&I,%+$0(O;>&Z&+.&

argue that our social wage system is more -:+-)%$H-D&\-)-05$(#$-%&"(H-&$)5#-(%-8&4#.9&<7n&million in 1997 to 15 million in 2012. This is buttressed by free basic services, nofee schools, %,O%$8$%-8&".,%$)1&()8&.+"-#&O-)-0+%&+.&+"-&poor. It is further argued that we do not need conditions4 given saturation levels in school enrolment and immunisations. But if there is one thing that we may need to consider, it should be whether conditions for social grants can be used

4 In Brazil, to receive the Bolsa Familia (social grant) parents have to ensure their children attend school and get their immunisations.

to stem the dropout rate in basic education.Now that the age limit for the child support

grant has been extended to the 18th birthday, continued school attendance could be made a condition for receiving the grant. Of the 1,55 million children who started school in 1998 only 0,55 million wrote matric (grade 12) in 2010 (Sokupa, n.d.). Given this dropout rate to grade 12 of roughly 64% (without factoring in other issues), such an intervention may have some positive results. The second lesson from Brazil, and the least

talked about, is the minimum wage. It has increased 4(%+-#&+"()&$)G(+$.)&(+&dUDdg&.H-#(;;&O-+?--)&<PPd&and 2008 (De Andrade Baltar, 2010). Conventional economics says that if you

bumped up minimum wages in this way the rate of labour absorption would decline, at the very least. Brazil avoided this through the holistic nature of their socioeconomic policies, including through the following logic: ]& *)5#-(%-8&(11#-1(+-&8-9()87&$)&+"$%&5(%-&arising out of social and minimum wage policy, should be combined with industrial policy and a tariff regime that encourage buying local goods.

]& X-(%,#-%&+"(+&$)5-)+$H$%-&;(O.,#W(O%.#/+$.)&

Economic growth and social grants improved the standard of living of the poor, but the living standards and wealth effect among the rich across the colour-line seems to have grown faster. Sabalele village, 2013. Photo: Nic Eppel

65

should include lower payroll taxes. For this, a "-(;+">&0%5,%&$%&5#$+$5(;D&

]& B5.).9$5&()8&%.5$(;&$)4#(%+#,5+,#-&%".,;8&O-&deliberately targeted. In Brazil, this included massive housing construction – which has a major multiplier effect – and a reduction in electricity prices (recently by 16% for households and by 28% for industry).5

]& e-H-;./9-)+&0)()5-&$)%+$+,+$.)%&%".,;8&/;(>&a more activist role in ensuring people’s access to credit on the basis of a targeted sectoral and geographic approach.

]& 3;;&+"-%-&$)$+$(+$H-%&%".,;8&O-&,)8-#/$))-8&by a social compact of sector leaders, who have strategic foresight. There should also be popular engagement and minicompacts across society.

5 Financial Times (2 October 2012).

In brief, what the Brazilian experience shows us is that it is possible to attain ‘propoor growth and progrowth poverty reduction’.

Drawing parallels If we were to draw parallels between South Africa and Brazil during the decade of the 2000s, it can be argued that we experienced roughly similar rates of economic growth. But our economy started to heat up even before the global economic crisis because it had surpassed its trend growth. South Africa’s unemployment rate was

reduced from 31% in 2003 to 23% in 2008 (The Presidency, 2010). And access to social grants was massively expanded, thus increasing aggregate demand or buying power. But industrial policy did not adequately respond to this, as we continue to import the very goods that the mass of consumers need, such as toasters, microwave ovens, suitcases, TVs and cellphones. While economic growth and social grants

improved the standard of living of the poor, the living standards and wealth effect among the rich across the colourline seems to have grown faster. There is a minimum wage policy, but unlike in Brazil, the minimum wages are sectoral and the levels in many sectors are quite low. We have some way to go before attaining a social compact, +#()%5-)8$)1&%-5+.#(;&$)+-#-%+%D&J"-#-&$%&(&8-05$+&of leadership in South African society. And so, shall South Africa have a Lula

Moment? In answering this question, it is necessary to

assess whether the Brazilian Lula Moment was precisely that: a passing moment incapable of sustaining itself, with the ‘spirits of the past’ – of the golden years – weighing heavily on the present. For instance, the Brazilian economic growth rate is faltering. From 7.5% in 2010 it has slipped to 2.7% in 2011; and it is estimated to have plummeted to 1% in 2012.6 President Dilma Rousseff is quoted as

citing high labour costs, low productivity, poor infrastructure, high taxation and competitive currency devaluations amongst the reasons for this state of affairs. Added to this is the unfavourable global economic environment. Incidentally, some of these factors were the very drivers of the Lula Moment!

6 Financial Times (2 October 2012).

Construction of infrastructure projects, South Africa. Photo: Graeme Williams

A Lula Moment for South Africa: Searching for Sugar Man?

Can conditions for social grants be used to stem the drop-out rate in basic education? Photo: Graeme Williams


66

J"-&\#(C$;$()&/#-%$8-)+&$%&5.)08-)+7&".?-H-#7&that the objective ‘to transform Brazil into a middleclass population’ will be attained. In an interview with the Financial Times, President Dilma further asserts that Brazil will develop into ‘a country that produces, that creates knowledge and applies it here… ’. And the government seems committed to deal with corruption, irrespective of the seniority of the individuals involved. As for South Africa, we should continue

%-(#5"$)1&4.#&2,1(#&X()7&()8&"./-&+.&0)8&"$9&alive and as enchanting as we have always imagined! !

References

De Andrade Baltar, P.E. et al. (2010) ‘Labour $)&+"-&F,;(&1.H-#)9-)+L&#-G-5+$.)&.)&#-5-)+&Brazilian experience’. Global Labour University Working Paper 9.

Rabinovitch, S. (2013) Financial Times (6 February).

Sokupa, T. (n.d.) ‘The matric results debate’ <http://www.afesis.org.za/LocalGovernanceArticles>.

The Presidency. (2010) Development Indicators.

Joel Khathutshelo

Netshitenzhe is the executive director of the Mapungubwe Institute for 8'$%'*-!)+K*F*)'!1"+(MISTRA). He has a Master

of Science (MSc) degree in Financial Economics from London University and a diploma in Political Science from the Institute of Social Sciences in Moscow. Between 1994 and 2009 he served in government, variously, as head of communication in President Nelson N%".*0%;&+1#,)*7+O6P+of Government Communications (GCIS) and head of the Policy Unit (PCAS) in The Presidency. He is a member of the national executive committee (NEC) of the African National Congress (ANC) and of the National Planning Commission. The original version of this chapter can be found on <www.mistra.org.za>.

The June 2013 protests in Brazil were initially organised to protest against increases in transport prices, but grew to include issues such as corruption in government and police brutality. Left: Protester and military police, downtown Niterói, Rio de Janeiro, June 2013. Photo: Fernando Frazão/ABr. Right: Protesters against inadequate provision of social services, Recife, Brazil, 20 June 2013. Photo: Flickr, Ninja Midia

67

CHAPTER 6

IT CAN BE DONE

Adam Habib

*#0(J)U)5/(#")2-$($)9%$)5/(#)%')B/+(9)U0"%2-.$)1"$()&#4/2"-(%2)elections, Tembisa township, Johannesburg, 1994. Right: Voters queue at dawn at a polling station north of Pretoria, 27 April 1994. Photos: Graeme Williams


68

In this chapter I look at forging an alternative progressive political agenda that recognises ()8&G.?%&4#.9&()&,)8-#%+()8$)1&.4&+"-&

balance of power, without compromising the goals of democratisation, empowerment and inclusive development. This agenda involves two distinct tasks: (i) conditioning political elites to become more accountable and responsive to the 5.)5-#)%&.4&5$+$C-)%S&()8&M$$R&4,;0;;$)1&+"-&.H-#(;;&objectives of the Constitution when the provisions .4&8$44-#-)+&5;(,%-%&5.9-&$)+.&5.)G$5+&?$+"&-(5"&other. The lack of accountability among the

political elites towards citizens (or their greater responsiveness to stakeholders who hold more leverage than ordinary voters) is a problem. Policies and political choices have compromised +"-&%,O%+()+$H-&4,;0;9-)+&.4&+"-&!.)%+$+,+$.)&because of tradeoffs made when different 5.)%+$+,+$.)(;&/#$.#$+$-%&5(9-&$)+.&5.)G$5+&?$+"&one another. Here are examples of such tradeoffs: QD& J"-&0#%+&$)H.;H-%&+"-&$9/;-9-)+(+$.)&.4&equity policy and related legislation, which #-G-5+&+"-&+#(8-W.44%&9(8-&O>&+"-&#,;$)1&/(#+>&in managing the tension between the goals of historical redress and national unity.

2. The second is implicit in the economic policies of the post(/(#+"-$8&-#(D&J"$%&#-G-5+%&+"-&tension between the constitutional objectives of economic growth and prosperity versus inclusive development.

3. The third is about the political choices made in the implementation of South Africa’s foreign policy. These have tended to prioritise systemic reform and historical redress over the rights of citizens, both of which are equally relevant and important objectives in the Constitution.

In moving ahead we need to: ]& -)"()5-&+"-&(55.,)+(O$;$+>&.4&+"-&/.;$+$5(;&elite to ordinary citizens, thereby making progressive outcomes more feasible; and

]& $)H-%+$1(+-&?"(+&/.;$5$-%&()8&/.;$+$5(;&5".$5-%&have the potential to enable the simultaneous pursuit of contesting constitutional goals, rather than requiring tradeoffs that favour one over another.

Reform or transformation 3)+.)$.&h#(9%5$&$8-)+$0-8&+?.&%+#(+-1$5&/#.I-5+%&for socialist parties: a war of manoeuvre, and a war of position. The former, for activists confronted with social conditions ripe for revolution, involves an assault on the state for political and economic power. The latter, he proposed, was the path for activists confronted with societies in which capitalism is dominant and the bourgeoisie holds sway. Here socialist parties had to methodically create counterhegemony through the propagation of alternative ideas, norms and values.

The promise of service delivery to the poor – will it happen? Khayelitsha market, Cape Town, 2011. Photo Steve Topham

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Essentially, Gramsci held that activists need to engage in a struggle for reforms that prepare the conditions for a future social revolution (Gramsci, 1971). Gramsci maintained that change occurs within the ‘limits of the possible’. The struggle was, therefore, not for just any type of reform, but rather for reforms that could serve as a bridge between the social realities of the present ()8&+"-&H$%$.)&.4&+"-&4,+,#-D&'.?&+.&8-0)-&%,5"&#-4.#9%&?(%&+"-&5"(;;-)1-&h#(9%5$&$8-)+$0-8&for the socialist parties of his time. This same challenge confronts progressive South African activists today: what reforms have the potential to fully transform the social realities inherited from apartheid? One of the earliest conceptual exercises

addressing this question in relation to postapartheid South Africa was undertaken by John Saul (1991) who, following Boris Kagarlitsky (1990), made the case for what he termed b%+#,5+,#(;&#-4.#9KD&2(,;&8-0)-8&%+#,5+,#(;&#-4.#9&as having a snowball effect, thus facilitating further reforms and collectively constituting a project of selftransformation. In addition, such reforms would be, in Saul’s words:

rooted in popular initiatives in such a way as to leave a residue of further empowerment – in terms of growing enlightenment/class consciousness, in terms of organisational capacity – for the vast mass of the population, whom thus strengthen

themselves for further struggles, further victories (Saul, 1991:6).

2(,;&G.,)8-#-87&".?-H-#7&?"-)&$+&5(9-&+.&%/-5$4>$)1&?"$5"&#-4.#9%&5.,;8&O-&8-0)-8&as structural. Caught up in the euphoria of the transition, and the rhetoric of intellectuals, progressive academics and union leaders, he proceeded to give credence to a slew of policies that, by no stretch of the imagination, can be described as transformative (Desai and Habib, 1994). Nevertheless, Saul’s conceptual point of

departure – structural reform – can help us understand how to advance an alternative progressive political agenda. For reforms to warrant the title ‘structural’ they must enhance the leverage of working and marginalised communities, diffuse power in favour of these social groups, and promote the accountability of political elites to the vast majority of citizens. Progressive activists have long been divided

on which actions, policies and strategies constitute transformational reforms. Within the Tripartite Alliance, comprising the African National Congress (ANC), the Congress of South African Trade Unions (Cosatu) and the South African Communist Party (SACP), and sometimes even outside it, excessive focus has been placed on the role of agency, and an inordinate amount of time is therefore spent on ensuring that the ‘right

Tripartite alliance: Zwelinzima Vavi (Cosatu), Jacob Zuma (ANC) and Blade Nzimande (SACP).

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/-./;-K&1-+&$)+.&/.%$+$.)%&.4&$)G,-)5-&$)&O.+"&+"-&ruling party and state institutions. As a result, too little attention has been paid

+.&+"-&%+#,5+,#(;&5.)01,#(+$.)%&.4&/.?-#&()8&the systemic checks and balances required for conditioning elite behaviour and decisions. An alternative progressive political agenda must prioritise engagement with the contemporary balance of forces, with a view to enhancing the responsiveness of political elites to the collective concerns of citizens and thereby reinvigorating the dynamic of accountability within South African society.

Reconstructing political accountability to citizens Political accountability is not simply a product of good leaders and appropriate institutional designs. These are important elements, but they facilitate accountability between elites and citizens only ?"-)&5$+$C-)%&"(H-&%,405$-)+&;-H-#(1-&.H-#&the elites to produce what I call ‘substantive uncertainty’. Such uncertainty is usually the product of

social mobilisation and extrainstitutional action on the one hand, and elite contestation on the other. Both political processes have the net effect

of dispersing power within society. This dispersal is what enhances citizens’ leverage over national political elites. It also has the potential to enhance the leverage of national political leaders over their international counterparts. Since electoral reform would go a long

way towards enhancing citizens’ leverage over political elites, a number of civic actors and political parties have called for an overhaul of the electoral system. Indeed, the majority of those appointed to the Slabbert Commission, which was appointed to investigate the issue in 2002, recommended that the electoral system be changed to a mixedmember proportional system, with 75% of legislative representatives elected from 69 multimember constituencies, and the remaining 25% from the party list to ensure overall proportionality as per the mandate of the Constitution (Electoral Task Team, 2003:12–30).1 J"$%&#-5.99-)8(+$.)&#-G-5+-8&(&/./,;(#&

view that while the nationallist and proportionalrepresentation system is fair and representative, it does not hold individual parliamentarians accountable to voters (Mattes and Southall,

1 Cosatu is in favour of this recommendation, although it suggests that the proportion of constituency versus party lists should be 65% and 35% respectively (Cosatu, 2004:7).

Ruimsig informal settlement, Roodepoort, Johannesburg, 2012. The big houses in the background are the Ruimsig Country Estate. Photo: Steve Topham

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2004). The express purpose of the Slabbert Commission’s proposal was to enhance the $)G,-)5-&5$+$C-)%&"(H-&.H-#&+"-$#&#-/#-%-)+(+$H-%D&The implementation of its recommendations had the potential to contribute to a political system that generates substantive uncertainty for the political elites. Unfortunately, the view of the majority of commission members was contested in a minority report, which favoured the status quo (Electoral Task Team, 2003:62–73). The ANC government ultimately accepted the minority report.2 A related but distinct development that has the

potential to greatly enhance the political elite’s accountability is the establishment of a more competitive political system. This requires the emergence of a viable opposition party which, as Courtney Jung and Ian Shapiro (1995:272–3) argue, is important in that it: ]& /#.H$8-%&(&%$+-&?"-#-&5#$+$5%&5()&5.(;-%5-&()8&organise

]& 4(5$;$+(+-%&(&/-(5-4,;&+#()%4-#&.4&/.;$+$5(;&.405-&]& /#.+-5+%&+"-&8-9.5#(+$5&.#8-#&4#.9&O-$)1&delegitimated when citizens are unhappy

]& -)(O;-%&(&H(#$-+>&.4&/,O;$5W$)+-#-%+&4,)5+$.)%7&including monitoring government performance and corruption.

A viable opposition party in South Africa would also enable citizens’ votes +.&5.,)+-#O(;()5-&+"-&$)G,-)5-&.4&.+"-#&stakeholders, including domestic and foreign $)H-%+.#%D&*+&5.,;87&+"-#-4.#-7&-)(O;-&(&%$1)$05()+&#-5.)01,#(+$.)&.4&/.?-#&#-;(+$.)%7&-)5.,#(1$)1&political elites to become more responsive to the socioeconomic interests of their citizens, including the poor and marginalised. At present, South Africa has all of the

institutional characteristics of a robust democratic political order, yet its political system is entirely uncompetitive. The ANC overwhelmingly dominates electoral support. More importantly, the largest opposition parties are unable to seriously compete with the ruling party because +"-$#&%,//.#+&O(%-&$%&;(#1-;>&5.)0)-8&+.&2.,+"&Africa’s minority groups. Thus, it can be argued that a viable political system does not yet exist in South Africa, and there is no prospect of

2 Both the majority and minority reports were published together in the Report of the Electoral Task Team (Electoral Task Team, 2003).

one emerging from the collection of parties represented in the national parliament (Habib and Taylor, 2001). The only alternative is for an opposition party

to emerge from within the Tripartite Alliance. In 2001, Rupert Taylor and I argued that, as the

natural political home of organised workers, the lower middle classes and the unemployed (that is, the most appropriate social base for such an alternative political project), Cosatu and the SACP represent the best hope for a viable parliamentary opposition party.3 We also held that both organisations retain

%$1)$05()+&/./,;(#&%,//.#+&(%&(&#-%,;+&.4&+"-$#&liberation credentials. Cosatu was the only institutional actor outside of the business sector ?$+"&+"-&.#1()$%(+$.)(;&()8&0)()5$(;&9,%5;-&to underwrite the development of a viable parliamentary opposition (Habib and Taylor, 2001:222). But we also acknowledged that there were

%$1)$05()+&.O%+(5;-%&+.&%,5"&(&%/;$+&$)&+"-&J#$/(#+$+-&3;;$()5-D&J"-&9.%+&%$1)$05()+&.)-&O-$)1&that both the leadership and Cosatu’s membership and the SACP opposed it. The leaders feared that leaving the alliance

would give the elite classes, both black and white, free rein to determine ANC policy (Marais, 2001). Jeremy Cronin, deputy general secretary of the SACP and since appointed deputy minister of public works, explicitly argued as much in an interview he gave in 2004 (quoted in Habib and Valodia, 2006:248). He contended that remaining in the alliance prevents neoliberal tendencies from dominating the ANC, and makes progressive victories more likely, especially as the global economy becomes increasingly beset by crises. The weakness in this perspective is that it

(%%,9-%&+"(+&/.;$5>&$)G,-)5-&.55,#%&.);>&H$(&participation in internal forums. Yet as many studies demonstrate, policy can as easily be $)G,-)5-8&O>&-:+#(W$)%+$+,+$.)(;&(5+$.)&()8o.#&+"-&deployment of other forms of leverage by social actors within society. After all, capital has been (O;-&+.&%$1)$05()+;>&$)G,-)5-&3A!&/.;$5>&%$)5-&1996 ostensibly without a substantive presence inside the party (Habib and Padayachee, 2000). Moreover, as Cosatu (2006) and the SACP

3 This view was, of course, contested; for an intellectual exchange on the topic, see Southall and Wood (1999a; 1999b).

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(2006a; 2006b) have both conceded, their alliance with the ruling party did little to prevent the slide into )-.;$O-#(;$%9&8,#$)1&+"-&0#%+&8-5(8-&.4&2.,+"&Africa’s transition. Another factor preventing a split in the

Tripartite Alliance is the overwhelming support for the alliance among workers and shop stewards. Three surveys conducted since 1994 have convincingly demonstrated that the overwhelming majority of Cosatu members support the continuation of the alliance (Buhlungu, 2006). Survey data cannot replace dispassionate analysis, however. Demonstrating that a majority of workers support the alliance does not address the issue of whether a break would strategically advance the agenda of the working and unemployed poor. After all, majorities have been known to support inappropriate or even incorrect strategic perspectives. Nevertheless, while the rationale for a break

in the Tripartite Alliance may be entirely logical, it has not happened yet, and developments at the ANC’s Polokwane conference in December 2007 made this an even more remote possibility. Cosatu was an integral element of the antiMbeki alliance, and Zuma’s win in the organisation’s national electoral conference was as much a victory for Cosatu and the SACP as it was for Zuma himself. Both Cosatu and the SACP were 8,;>&#-?(#8-8&?$+"&%$1)$05()+&5(O$)-+&/.#+4.;$.%7&

including those of economic development, trade and industry, and higher education. While Cosatu members may still be unhappy about some of the policies and about the corruption scandals plaguing the Zuma administration, the union 4-8-#(+$.)&"(%&4(#&9.#-&$)G,-)5-&+"()&$+&"(%&had before. For the foreseeable future, then, it is unlikely that Cosatu will seriously contemplate leaving the alliance or charting an independent path. In this context, it is vital that Cosatu maintain a

5#$+$5(;&8$%+()5-&()8&#-+($)&%,405$-)+&$)8-/-)8-)+&leverage to enable it to pressurise its alliance partners into taking its interests seriously. Cosatu’s general secretary, Zwelinzima Vavi, is clearly aware of this, and is openly leading !.%(+,&?$+"&(&H$-?&+.&-)"()5$)1&$+%&$)G,-)5-&O>&establishing additional alliances with civil society. The ANC is not particularly happy about

this, and has taken measures to contain what it perceives as Vavi’s exuberance in this regard.4 But it is worth noting that an independent and critical Cosatu, willing to take on the state, is a necessary political condition for fostering a level

4 The ANC’s secretarygeneral, Gwede Mantashe, has been particularly critical of Vavi’s outspokenness and public criticisms of the ANC, and notably in his report to the ruling party’s Mangaung conference in late 2012. J"-&3A!&"(%&(;%.&.405$(;;>&5.9/;($)-8&(O.,+&p(H$&+.&Cosatu. See Business Day (20 December 2012) and Mail & Guardian (21 December 2012).

Left: Service delivery protests, Khutsong march, Johannesburg, 2012. Photos: William Matlala

Squatters sit on the remains of their demolished dwellings, Johannesburg, 1991. Photo: Graeme Williams

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of accountability within the ruling political elite. Although this is unlikely to compensate for a viable opposition party, it at least has the potential to keep rulingparty politicians on their toes. In the longer term, however, the contradictions

.4&1.H-#)()5-&,)8-#&(&#-%+#$5+$H-&0%5(;&#-1$9-&are likely to overwhelm the Tripartite Alliance and force the partners to part ways. An alternative progressive political agenda must be aware of +"$%7&()8&#-9($)&?$;;$)1&+.&5.)%$8-#&+"-&8$405,;+&5".$5-%&+"(+&9(>&O-&#-^,$#-8&4.#&(&#-5.)01,#(+$.)&of power. This includes enabling the emergence of a viable opposition party and ensuring, at least in the interim, that the union movement retains a critical independence within the Tripartite Alliance. The development of substantive uncertainty,

and the related enhancement of political accountability, necessitates the emergence of an independent, robust plural civil society. Much progress has been made in this regard. And perhaps this is where hope for South Africa $%&9.%+&.4+-)&;.5(+-87&-H-)&+".,1"&%$1)$05()+&challenges loom large. Civil society has not only been fundamentally

transformed in the post1994 era. But sections of civil society have also had a dramatic systemic impact on the state. They have contributed to substantive uncertainty making elites – at least partially – more responsive to the concerns of

poor and marginalised citizens. This has occurred 4.#&+?.&%$1)$05()+&#-(%.)%D&First, political democratisation and economic

liberalisation have led to the transformation of an ostensibly homogenous, progressive antiapartheid civil society into one composed of at least three distinct blocs – nongovernmental organisations (NGOs), survivalist agencies, and social movements – all with very distinct relationships with the state. The diverse roles, functions and relationships of these different sections of civil society have the potential to increasingly institute checks and balances that are capable of forcing the South African state to become responsive to its citizens, or at least to be made aware of its lack of responsiveness in this regard. Second, the social movements that have

emerged in the postapartheid era ‘contribute to the restoration of political plurality in the political system’, facilitate ‘the accountability of state elites to our citizenry’, and have:

contributed to the emergence of a political climate that prompted government’s recent shift to a more state interventionist and expansive economic policy with a more welfarist orientation (Ballard et al., 2006).

These developments, together with the communitybased protests that Peter Alexander (2012) has termed a ‘rebellion of the poor’, have

It Can be Done

Right: Cosatu May Day rally, 2012. Photo: William Matlala


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begun to initiate a process of ‘enabling popular agency’.5 The emergence of popular agency is necessary for the dispersal of power. It in turn forces political elites to become accountable to citizens. This at least raises the possibility of a more socialdemocratic development trajectory. An alternative progressive political agenda must therefore encourage and contribute to the vibrancy and plurality of contemporary civil society. These three strategies then – the pursuit of

electoral reform, facilitating the emergence of a viable parliamentary opposition and the critical independence of the union movement, and encouraging the emergence of an independent and plural civil society – constitute the core elements of an alternative progressive political agenda. Individually and collectively, they have the potential to disperse the concentration of political power. This in turn, would enhance the leverage that citizens have on political elites, making them less certain of their political futures and thus more responsive to the interests of the electorate. The net effect could be the emergence of a social democracy that combines the procedural

5 Jeremy Cronin coined this term at a seminar in 2006, where he served as a discussant to a presentation I made on a book I coedited, titled Voices of Protest (Ballard et al., 2006).

aspects of democracy with inclusive development outcomes involving all citizens. This outcome, however, also requires a

programme of policies capable of managing the tensions and reconciling the competing interests of the various societal stakeholders, captured within the Constitution at the dawn of South Africa’s democratic transition.

Reconciling constitutional rights Three sets of constitutional rights have come into tension with each other as a result of decisions and policies of the postapartheid regime: ]& J"-&,)^,(;$0-8&$9/;-9-)+(+$.)&.4&5#,8-&(40#9(+$H-&(5+$.)&,)8-#9$)-%&O.+"&+"-&delivery of services to the citizenry and the emergence of a national identity, both of which are constitutional goals and responsibilities.

]& J"-&5"(;;-)1-%&.4&-5.).9$5&1#.?+"&(#-&in tension with the goals of inclusive development, symbolised in the fractious public debate around inequality, poverty and unemployment.

]& 2.,+"&34#$5(K%&4.#-$1)&/.;$5>&-)1(1-9-)+%&#-G-5+&(&+-)%$.)&O-+?--)&(8H()5$)1&5$H$5&()8&human rights versus systemic reform.

An alternative progressive political project

The Landless People’s Movement march during the World Summit, Johannesburg, 2003. Photo Graeme Williams

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has to manage the tensions between these 5.)%+$+,+$.)(;&.O;$1(+$.)%&()8&0)8&?(>%&.4&pursuing them simultaneously. This can be done with some imagination and contextually grounded engagement.

D23/*(.+F#$(4.+0,$B'&-$#22#4.+F#$service delivery and national identity formation 340#9(+$H-&(5+$.)&$%&).+&/#.O;-9(+$5&$)&$+%-;4D&\,+&its implementation in the public service, within the prevailing conservative macroeconomic framework, and alongside the uncritical adoption of management practices developed in the O,%$)-%%&%-5+.#7&"(%&"(8&(&%$1)$05()+;>&)-1(+$H-&effect on the capacities of the postapartheid state. Elsewhere Kristina Bentley and I have

deliberated on how this tension, between historical redress on the one hand and national identity and state capacity on the other, could be mediated (Habib and Bentley, 2008). We argued that a substitutionist, classbased redress agenda, %,//.#+-8&O>&9.#-&%/-5$05&#(5-WO(%-8&$)$+$(+$H-%7&would allow for the simultaneous pursuit of South Africa’s two constitutional priorities in this regard.6 While classbased elements of such a redress

programme would generally address both the deracialisation and erosion of poverty across %.5$-+>7&#(5-WO(%-8&$)$+$(+$H-%&?.,;8&O-&5.)0)-8&+.&(#-(%&?"-#-&+"-&4.#9-#&8$8&).+&"(H-&%$1)$05()+&deracialisation effects (Bentley and Habib, 2008:347–50). For example, in the upper echelons of the corporate sector, racebased initiatives such as sectoral charters could establish deracialisation 1.(;%&;$)V-8&+.&%/-5$05&+$9-4#(9-%7&()8&+.&5#$+-#$(&by which companies would qualify for state tenders and other government contracts. 3&),9O-#&.4&%/-5$05&O-)-0+%&-9-#1-&4#.9&+"-&

adoption of a redress programme that involves both class and racebased elements. First, it would prevent economic and political elites within the O;(5V&/./,;(+$.)&4#.9&9.)./.;$%$)1&+"-&O-)-0+%&of redress initiatives. Second, such programme would allow the state ‘to focus its limited

6 Many prefer the simpler notion of a substitutionist, 5;(%%WO(%-8&(40#9(+$H-&(5+$.)&/#.1#(99-D&E-&(#1,-&+"(+&while this ‘could deracialise the lower echelons of the class hierarchy’, it is unlikely to have the same effect on ‘the upper echelons of South Africa’s corporate structure’ (Bentley and Habib, 2008:347).

resources on poorer communities’ while using its regulatory power to encourage ‘the corporate sector to use its own resources to deracialise the market economy’ (Habib and Bentley, 2008:348). Finally, this kind of redress programme would

have more legitimacy among both black and white citizens since even the latter are open to pursuing redress that is directed towards poverty alleviation (Friedman and Erasmus, 2008; Seekings, 2005). Its nonracial thrust would also encourage the emergence of a national identity – a necessary precondition for the realisation of the cosmopolitan vision that runs through South Africa’s Constitution.

Economic growth and inclusive developmentA social democratic political economy is a prerequisite if South Africa is to comprehensively deal with the challenges of inequality, poverty, and unemployment. Although this was acknowledged at the ANC’s national conferences in 2007 and 2012, and some elements of a social democratic platform have gradually been adopted, this economic perspective is still constantly challenged within the ruling party by individuals and factions that (8H.5(+-&0%5(;&5.)%-#H(+$%9&$)&+"-&1,$%-&.4&0)()5$(;&/#,8-)5-D&J"-&O(++;-&4.#&+"-&-5.).9$5&soul of the ANC has to be resolved, the economic divides bridged, and a consensus built around a social democratic political economy. Related to this is the need for a new social pact

to be cemented between business, labour and the state. The structural impediment to a viable social pact – the inequality in leverage between business and labour – has been overcome as a result of !.%(+,K%&1#-(+-#&$)G,-)5-&$)&+"-&/.%+W_.;.V?()-&era. However, the Zuma administration has failed to manage the expectations of both the economic elite and the general populace with the result that the other essential foundation for a successful pact – a willingness by all to defer the immediate realisation of their desires – has not been achieved. This is a failure of political management. At one level, this has been recognised by some

/.;$+$5(;&;-(8-#%7&()8&$)&/(#+$5,;(#&O>&0)()5-&minister, Pravin Gordhan. He has spoken out against excessive executive remuneration and enrichment in both the private and public sectors.

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At another level, however, the lesson has not been truly internalised. This is most evident in a column featured in the Sunday Times since February 2012, titled ‘Each One, Hire One’. The column aims to encourage public debate on how to deal with South Africa’s unemployment crisis, and has attracted contributions from a number of ruling party politicians, including the ANC’s deputy president Cyril Ramaphosa (2012) and Pravin Gordhan (2012), opposition leaders such as Helen Zille (2012) and Lindiwe Mazibuko (2012), some corporate executives, namely Brett Dawson (2012), Bobby Godsell (2012), Michael Spicer (2012) and Moeletsi Mbeki (2012), and even the occasional labour leader, such as Zwelinzima Vavi (2012). What is striking about the contributions,

however, is that while all recognised the need for a social pact, as well as the formal necessity of compromise, none (other than Vavi) was willing to recognise the legitimacy of workers’ concerns related to labourbrokering practices and South Africa’s lowwage growth path. Almost all the contributors berated the unions for focusing solely on the interests of their own members, ignoring the needs of the unemployed, and undermining -5.).9$5&1#.?+"&()8&-405$-)5>D&e-%/$+-&(;;&the platitudes about working together, most contributors to the column seem to assume that any social pact must be constructed decidedly on terms favoured by the corporate sector. For the moment let’s leave aside the irony of

a whole range of individuals, mainly from the political and economic elites, professing that they represent the true interests of the unemployed, ()8&;-5+,#$)1&,)$.)%&.)&+"-$#&%-;0%")-%%D7 It is union members who live and interact on a daily basis with those who are truly marginalised. Should we not be concerned that this diverse set of leaders, with their impressive track records and experience, have not yet understood the basis of successful social pacts? Pacts require compromise. They are established to manage the dilemmas presented by competing interests. A central dilemma that a South African social pact would have to address is how to enable economic competitiveness and the accumulation of work experience by new entrants to the labour market,

7 This charge is very common in political discourse, levied mainly by economists, almost all of whom are on the payroll of the banks and other business corporations.

without losing the hardwon gains of the labour movement as expressed in the Labour Relations Act of 1995. The unions fear that compromises might

weaken the 1995 Labour Relations Act, and that this would allow employers to roll back the gains won by workers in the formal sector. There is precedent for this in the postapartheid era, and to argue that this is impossible and unrealistic (see Zille, 2012), is to be seriously out of touch with the economic dynamics of the last 20 years. For example, in the mid1990s, internal employees carried out cleaning services in most companies and public institutions. Since then, most private companies and public institutions have subcontracted cleaning services to external companies that employ workers at much lower ?(1-%&()8&/#.H$8-&4(#&4-?-#&O-)-0+%D&Similarly, a study on transformation in South

African mines (Bezuidenhout, 2008) demonstrated that as the racial ownership of mines has changed, so working conditions have worsened. Essentially, South Africa’s more marginal mines have been sold to black entrepreneurs who have derived /#.0+%&4#.9&%^,--C$)1&?(1-%&()8&#-8,5$)1&O-)-0+%D&J"$%&"(%&O--)&(5"$-H-8&9($);>&+"#.,1"&the use of labour brokers, which have therefore served as a ‘safety valve’ for business owners to avoid the obligations made mandatory by the Labour Relations Act. This is not to deny that South Africa faces

%$1)$05()+&5"(;;-)1-%D&X()>&-5.).9$5&%-5+.#%&are not globally competitive. Excessive regulation and red tape compromises the viability of many small enterprises (Ramaphosa, 2012). Moreover, given the staggering rate of unemployment among young people, there is an urgent need to create an environment in which employers are willing to take on new entrants into the labour market so they can accumulate the necessary work experience to make them valuable and productive employees (Bernstein, 2012; Zille, 2012). These challenges should be of as much concern to labour as they are to employers and the state. After all, addressing these challenges is necessary for realising the vision of inclusive development to which the union movement is committed. The challenge for the potential partners in a social pact is to create the conditions to address these /#.O;-9%&?$+".,+&%(5#$05$)1&.#&?-(V-)$)1&+"-&protections afforded to formal sector employees.

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It can be doneWith some imagination this can be done. For example, agreements entered into with employers in the textile sector in Newcastle in October 2011 involved wage concessions for new employees. This suggests that unions can be pragmatic when it comes to ensuring company competitiveness and survival.8 Thus unions may have to compromise on a wage subsidy for new and young employees, and allow for special wage and employment provisions for certain economic sectors or geographic zones. Similarly, employers may have to commit to employment targets in these sectors, and provide guarantees that they will not try to generalise these special provisions to the broader labour market. In other words, the fears of all parties must be addressed, and in this process, compromises are required from, and costs need to be borne by, both business and labour. This message was, however, missing from the

Sunday Times ‘Each One, Hire One’ columns. None of the contributors seemed to have thought through the compromises required for the establishment of a social pact. But if this is not done, how is a social pact to be realised? Moreover, for as long as an equitable social pact

8 See Mercury (18 October 2011).

remains a distant dream, South Africa will not succeed in bridging the divide between economic growth and inclusive development. Nor will it be able to address the related polarisation and social pathologies that characterise our society. An alternative progressive political agenda

must therefore look to cement an equitable social pact by fashioning the compromises that can enhance economic competitiveness, as well as the accumulation of experience for new entrants in the labour market. This needs to be done without fundamentally compromising the hardwon gains made by workers in the formal sectors of the economy. On the international front, South African

politicians must also transcend the market fundamentalism so apparent in some of the documentation issued by the New Partnership for Africa’s Development (Nepad) (Bond, 2004; Vale and Taylor, 1999), in its refusal to regulate South African investment on the continent (Habib and Selinyane, 2006), and in the almost timid reforms that have to date been implemented by the International Monetary Fund (IMF) and the World Bank.9 It is useful to note here that China’s success is not simply linked to its market size, but also to its pragmatism in manipulating this +"#.,1"7&4.#&$)%+()5-7&0:$)1&$+%&-:5"()1-&#(+-&+.&suit its own ends (Breslin, 2006). Furthermore, South Africa’s foreign policy

practitioners and trade negotiators need to be bolder. They need to involve themselves in the politics of brinkmanship (as occurred in Cancun), and in engaging global civil society to advance a humanoriented development agenda.10 Finally, none of this will be possible without

9 Under pressure and criticism from South Africa and other countries, both institutions have implemented limited reforms around, for instance, voting proportions on their respective boards. Also an ostensibly open interview is now required for the heads of both organisations. But the United States of America and Europe still retain control via the weighting allocated to their votes. This enables them to push through decisions and appoint their respective candidates. The reforms South Africa pushes for must therefore be more radical and substantive, or risk conferring legitimacy on these organisations without delivering a more equitable global order.

10 Civil society could be far more deeply engaged than it is at present. South African diplomats could, for instance, proactively caucus with certain international civic movements and develop common positions prior to global negotiations. They could then use the external mobilisation on the streets as leverage in the actual negotiations within the global forums.

Cosatu national strike against labour brokering, 2012. Photo: William Matlala

It Can Be Done


78 %$1)$05()+&5(/(5$+>&O-$)1&O,$;+&(+&+"-&;-H-;&.4&technical skills within state institutions, and the internalisation of these strategic perspectives among state personnel far beyond the narrow band of people who occupy the presidential and foreignpolicy apparatus (Alden and Le Pere, 2004). All this is necessary, not only because

constructing an equitable global order is a moral imperative, but also because it is a strategic necessity if South Africa is to succeed in building an inclusive domestic economy that caters for the interests and needs of all of its citizens.

The necessity of leadership Of course, none of this will be achievable without astute leadership – and not simply at a technical level, although technical skills are particularly important for those occupying professional positions in state structures. The leadership referred to here is of a political kind and involves two distinct elements: 1. a deep understanding of the state of the society, where it needs to go, the obstacles in its path, and possible means to transcend its challenges; and

2. the ability to engage multiple stakeholders, understand their interests, and fashion a %,405$-)+&5.)%-)%,%&(9.)1&+"-9&?$+".,+&compromising on the primary societal goal.

These are the abilities that enable leaders to mobilise collective institutional muscle – within the ruling party, inside the state, and in society – that is necessary to pursue and realise a transformed democratic social democracy. Such political leadership has not yet been forthcoming from the presidency. But such leadership does not always have to be provided by the president. *+&5()&O-&/#.H$8-8&O>&.+"-#&%-)$.#&01,#-%&?$+"$)&the ruling party. But so far others seem to have been reluctant to play this role, perhaps informed by a fear that President Zuma, confronted with a factionalised ANC, may interpret any intervention in this regard as an attempt to usurp his authority. In this sense, the factional character of the ANC, and the succession struggles within the organisation, has undermined the possibility of other senior leaders playing this leadership role. But the failure of political leadership exists not

simply at a presidential and governmental level. It exists at many other levels in South African society. Very few leaders across the political,

Nehawu rally, Ulundi Stadium, KwaZulu-Natal, June 2008. Photo: William Matlala

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corporate and civic hierarchy recognise and internalise the conditioning effects of the balance of power, or the need to transform this and ensure that more progressive political and socioeconomic alternatives become feasible. Instead the dominant strategic orientation within and outside the Tripartite Alliance is focused at the level of agency. Individual personalities therefore are targeted for certain positions, in the hope that they will then deliver on the particular policies desired by the relevant ideological faction. Democracy and inclusive development is thus simply reduced to the right person getting the right job. Astute political leadership has not only to

recognise the conditioning effects of the balance of power, but also has to fashion the structural reforms capable of transforming the distribution of political and economic leverage, thereby enabling more progressive outcomes. An alternative progressive political agenda

has to enable the emergence of, and be led by such a political leadership. When this happens at multiple levels across the political, corporate and civic hierarchy, including at the most senior levels of the ruling party, South Africa will really begin the long and arduous task of transforming +"-&5.)01,#(+$.)%&.4&/.?-#&$)&.,#&%.5$-+>&and building a democratic, accountable social democracy responsive to the interests of all of its citizens. !

References

Alexander, P. (2012) ‘A massive rebellion of the poor’. Mail & Guardian (13–19 April).

Alden, C. and Le Pere, G. (2004) ‘South Africa’s postapartheid foreign policy: from reconciliation to ambiguity’. Review of African Political Economy 31(100):283–97.

Ballard, R., Habib, A. and Valodia, I. (eds). (2006) Voices of Protest: Social Movements in Postapartheid South Africa. Pietermaritzburg: UKZN Press.

Bentley, K. and Habib, A. (2008) ‘An alternative framework for redress and citizenship’ in Habib and Bentley (eds), Racial Redress and Citizenship in South Africa.

Bernstein, A. (2012) ‘Tough calls needed to break impasse’. Sunday Times (4 March).

Bezuidenhout, A. (2008) ‘Black economic empowerment and externalization in the

South African mining industry’, in Habib and Bentley (eds), Racial Redress and Citizenship in South Africa.

Bond, P. (2004) Talk Left, Walk Right: South Africa’s Frustrated Global Reforms. Pietermaritzburg: UKZN Press.

Breslin, S. (2006) ‘Interpreting Chinese power in the global political economy’. Presented to the Conference on Regional Powers in Asia, Africa, Latin America and the Middle East, hosted by the German Institute of Global and Area Studies (GIGA) 11–12 December.

Buhlungu, S. (2006) Trade Unions and Politics: Cosatu Workers after 10 Years of Democracy. Cape Town: HSRC Press.

Cosatu. (2004) ‘Why workers should vote ANC’, http://www.cosatu.org.za/docs/2004.

Cosatu. (2006) ‘Cosatu political discussion document: possibilities for fundamental change’. Prepared for the 9th National Congress 18–21 September.

Adam Habib is vice-chancellor and principal at the University of the Witwatersrand, South Africa. He was formerly deputy vice-chancellor Research, Innovation

and Advancement at the University of Johannesburg, South Africa and has held academic appointments over the last decade at the Universities of Durban-Westville and KwaZulu-Natal. Adam has served as co-editor of the social science academic journal, Transformation, and 'E*+1#,)!%0+.!&)!20!"%$>+Q1($"%0+1#+'E*+81('E+African Association of Political Science, Politikon. He has recently concluded a study on the state of academic freedom in South Africa, and sat on the task group. His most recent book, titled South Africa’s Suspended Revolution: Hopes and Prospects, is published by Wits University Press and Ohio University Press. This chapter was drawn and adapted from Chapter 7 of The Suspended Revolution.

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Dawson, B. (2012) ‘Job creation is the business of business’. Sunday Times (1 April).

Desai, A. and Habib, A. (1994) ‘Social movements in transitional societies: a case study of the Congress of South African Trade Unions’. South African Sociological Review 6(2).

Electoral Task Team (ETT). (2003) ‘Report of the Electoral Task Team’ <www.elections.org.za/content/WorkArea/DownloadAsset.(%/:i$8qTQUrsD

Friedman, S. and Erasmus, Z. (2008) ‘Counting on “race”: what the survey’s say (and do not) about “race” and redress’, in Habib and Bentley (eds), Racial Redress and Citizenship in South Africa.

Godsell, B. (2012) ‘50 million wealth creators’. Sunday Times (5 February).

Gordhan, P. (2012) ‘Let us seize the day’. Sunday Times (22 April).

Gramsci, A. (1971) Selections from the Prison Notebooks. London: Lawrence & Wishart.

Habib, A. and Bentley, K. (eds). (2008) Racial Redress and Citizenship in South Africa. Cape Town, HSRC Press.

Habib, A. and Selinyane, N. (2006) ‘Constraining the unconstrained: civil society and South Africa’s hegemonic obligations in Africa’, in W. Carlsnaes and P. Nel (eds), In Full Flight: South African Foreign Policy After Apartheid. Midrand: Institute for Global Dialogue.

Habib, A. and Valodia, I. (2006) ‘Reconstructing a social movement in an era of globalisation: a case study of Cosatu’, in Ballard et al. (eds), Voices of Protest: Social Movements in PostApartheid South Africa.

Habib, A. and Taylor, R. (2001) ‘Political alliances and parliamentary opposition in South Africa’. Democratization 8(1):207–26.

Habib, A. and Padayachee, V. (2000) ‘Economic policy and power relations in South Africa’s transition to democracy’. World Development 28(2):245–63.

Jung, J. and Shapiro, I. (1995) ‘South Africa’s negotiated transition: democracy, opposition and the new constitutional order’. Politics and Society 23(3):269–306.

Kagarlitsky, B. (1990) The Dialectic of Change. London: Verso.

Marais, H. (2001) South Africa: Limits to Change: The Political Economy of Transition. London: Zed Books.

Mattes, R. and Southall, R. (2004) ‘Popular attitudes towards the South African electoral system’. Democratization 11(1):51–76.

Mazibuko, L. (2012) ‘Outsider Vavi’. Sunday Times (8 April).

Mbeki, M. (2012) ‘Our very stark choice’. Sunday Times (15 April).

Ramaphosa, C. (2012) ‘Debate is important, action is critical’. Sunday Times (19 February).

SACP. (2006a) ‘Class, national and gender struggle in South Africa: the historical relationship between the ANC and the SACP, Part 1’. Bua Komanisi Special Edition (May).

SACP. (2006b) ‘Class struggles and the post1994 state in South Africa, Part 2’. Bua Komanisi Special Edition (May).

Saul, J. (1991) ‘South Africa: between “barbarism” and “structural” reform’. New Left Review 188.

Seekings, J. (2005) ‘The colour of desert: race, class and distributive justice in postapartheid South Africa’. CSSR Working Paper 126.

Southall, R. and Wood, G. (1999a) ‘Taking the alliance seriously: replying to Habib and Taylor’. Transformation 40:121–6.

Southall, R. and Wood, G. (1999b) ‘Cosatu, the ANC and the election: wither the alliance?’ Transformation 38:68–81.

Spicer, M. (2012) ‘Lose the shortterm thinking’. Sunday Times (26 February).

Vale, R. and Taylor, I. (1999) ‘South Africa’s postapartheid foreign policy 5 years on – from “pariah” state to “just another country”’. The Round Table 88(352):629–34.

Vavi, Z. (2012) ‘What we must do to create jobs in South Africa’. Sunday Times (12 February).

Zille, H. (2012) ‘We have to make it easier to do business in South Africa’. Sunday Times (11 March).

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CHAPTER 7

WHAT CAN SOUTH AFRICA LEARN FROM LULA’S BRAZIL? A COSATU PERSPECTIVE

Neil Coleman

Cosatu May Day rally, Sedibeng, near Johannesburg, 2009. Photo: William Matlala


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Karl Marx argued that:

Men make their own history, but they do not make it just as they please; they do not make

it under circumstances chosen by themselves, but under circumstances directly encountered, given and transmitted from the past.1

The art of the possible: Brazil versus South AfricaIn this chapter, I argue that the Brazilian Workers’ Party and President Lula have fared remarkably well in making history, despite their inherited circumstances. And furthermore, that they succeeded in progressively changing their circumstances to ensure new power relations, thereby creating greater space for manoeuvre (see Chapter 1). I compare their performance in that regard, with that of the South African movement. Two ‘little known’ facts about Brazil speak

volumes about the tactical nimbleness of the Brazilian leadership, and President Lula in particular, in navigating treacherous terrain. They achieved advancements in a country which, like South Africa, was emerging from despotic rule. Brazil’s military dictatorship ended in 1985:]& F,;(&.O+($)-8&(&9(I.#$+>&$)&+"-&<PP<&presidential elections, similar to Dilma Rousseff, who became president in 2010. But the president and Workers’ Party have had to manage a Brazilian Congress and Senate in which they have had slightly less than 20% representation. They’ve been forced to govern in coalition with over 10 political parties. The Workers’ Party had 90 seats out of 513 in Congress in 2012. The left and centreleft only controlled 200 seats in Congress. The party has had to make alliances with the centre and right on many issues.2

]& Y.;;.?$)1&+"-&/#-H$.,%&#-1$9-K%&/,#%,$+&of neoliberal economic policies for nearly

1 See The Eighteenth Brumaire of Louis Bonaparte <http://www.goodreads.com/work/quotes/819841>.

2 Author interview with PT International Secretary, Iola Iliada (26 September 2012). The Workers’ Party has been able to consolidate its position since Lula’s 0#%+&term. Its Para o Brasil Seguir Mudando (For Brazil to Keep Changing) coalition has asserted a majority in both houses under President Dilma Rousseff, and taken a clear majority of governorships. Only 16 of the 38 cabinet seats were given to the Workers’ Party but it has ensured control of strategic portfolios, particularly economic portfolios.

a decade, Presidentelect Lula faced a coordinated backlash from the international 0)()5$(;&$)%+$+,+$.)%D&J"->&4-(#-8&+"-&introduction of radical policies. There was a 9(%%$H-&.,+G.?&.4&5(/$+(;D&F,;(7&I,%+&(%&+"-&African National Congress (ANC) did, made a written commitment to maintain ‘frugal’ macroeconomic policies.

The South African government faced similar /#-%%,#-&4#.9&+"-&0)()5$(;&9(#V-+%&$)&+"-&#,)Wup to the Asian crisis. President Lula chose to pursue a path of ‘macroeconomic stabilisation’ because he feared a massive disruption to the Brazilian economy. However, aspects of Lula’s early policies helped to lay the basis for the neo developmental economic strategy which would emerge in his second term.In his 0#%+&+-#9&4#.9&<PPd&+.&<PPN7&_#-%$8-)+&

Lula pursued a twotrack policy:1. He left conservative macroeconomic policies relatively intact, although he reversed some elements of previous neoliberal policies, for example through halting privatisation.

2. Simultaneously, he introduced cautious but %$1)$05()+&9-(%,#-%&+.&/#.9.+-&(&%+(+-W;-8&industrial and development policy. Policies ?-#-&$)+#.8,5-8&+.&-:+-)8&/,O;$5&0)()5-&.)&(&large scale, raise incomes of lowpaid workers, increase the national minimum wage, and extend and increase the value of social grants in the form of the Bolsa Familia and pensions. These policies, despite their limitations, had (&9.8-%+&$9/(5+&$)&F,;(K%&0#%+&+-#9D&J"$%&$%&#-G-5+-8&$)&-(#;$-#&5"(/+-#%&O>&h$.#1$.&Schutte and Gay Seidman.

The persistence of neoliberal macroeconomic policies in Lula’s 0#%+&+-#9&$)&\#(C$;&9$1"+&suggest parallels with South Africa’s Growth Employment and Distribution (Gear) period. Gear formally spanned the years 1996 to 2001. But %,5"&5.9/(#$%.)%7&?"$;-&+-9/+$)17&(#-&%,/-#05$(;&for two reasons. Firstly, Lula introduced elements of a

redistributive wageled economic growth strategy from the beginning. This was accelerated during his second term. The strategy involved largescale intervention in the labour market. It involved implementing policies that promoted redistribution of income to the poor and low/($8&?.#V-#%7&%$1)$05()+&-9/;.>9-)+&5#-(+$.)7&

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a marked reduction in inequality, and a massive reduction in poverty. The wage share in gross domestic product (GDP) rose from a low of 39% in 2003 to 48% in 2011 (Correa et al., 2013). This deliberate strategy of income redistribution in Brazil is contrary to the post19953 trajectory of economic development in South Africa. Our economic policies led to widening inequality, growing unemployment, persistently high levels of poverty, and a steep reduction in the share of workers’ income as a proportion of GDP (from around 55% in 1998 to below 47% in 2008).Secondly, despite modest success, the

Brazilian leadership recognised that the 0#%+&term’s redistributive policies (2003 to 2006) did not have the desired impact. They knew they had to shift from excessively cautious macroeconomic policies. Rather than staying stuck in this orthodox paradigm, as has largely been the case in South Africa over the last 18 years, the Brazilians moved boldly on certain fronts. They did not completely abandon all elements of a conservative macroeconomic stance, as we see below. But they took certain strategic decisions to ramp up interventions in the economy. This, despite opposition from sections of Brazilian business and the 0)()5$(;&%-5+.#&$)&/(#+$5,;(#D&

3 The period of conservative economic policy in South Africa started in earnest in 1995 driven by then deputy president Thabo Mbeki. He announced a ‘sixpack’ of austerity measures, including privatisation, an abandonment of the progressive Reconstruction and Development Programme (RDP), followed by the adoption in 1996 of the conservative macroeconomic programme, misleadingly named the Growth Employment and Redistribution (Gear) strategy.

The economic interventions in Brazil were not limited to policy shifts. There was a deliberate realignment of political leadership as well as in the bureaucracy. This happened in key economic ministries and institutions, such as the ministries .4&0)()5-7&/;())$)17&()8&%+#(+-1$5&(44($#%7&+"-&A0"5'(B05!'"0/()$(C$9$"+'/+!7$"4'(D5'"67!5'(e Social (BNDES) (national development bank), and the government’s Institute of Applied Economic Research (IPEA).4 President Dilma Rousseff later extended this transformation to the Brazilian central bank.

Paralysed by cautionThis strategic leadership is contrary to the South African experience, where there has been an excessive timidity about tampering with the 0)()5$(;&%-5+.#&()8&V->&%+(+-&5-)+#-%&.4&-5.).9$5&orthodoxy, such as the Treasury and the Reserve Bank. As wellknown academic Ha Joon Chang states, the South African leadership, on economic matters, has been ‘paralysed by caution’ (Morais and SaadFihlo, 2012:792).5 Cosatu, in discussion papers in the runup to its

2012 Congress, looked at the Brazilian experience and coined the notion of the ‘Lula Moment’. This captured the idea of a political moment where the progressive forces were able to seize the strategic initiative despite pressures from the markets and conservative social forces. Brazil demonstrated that a decisive movement could engineer such a change in the face of apparently unfavourable conditions.

4 Morais and SaadFihlo, 2012:792. Also see Schutte, 2014.5 Interview with Ha Joon Chang, New Agenda 31, 2008.

Public sector workers march to the Union buildings against state privitisation, Pretoria, 26 July 1997. Photo: William Matlala

What Can South Africa Learn from Lula’s Brazil? A Cosatu Perspective


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The Lula Moment was particularly relevant to the South African context, where there were endless debates about economic policy shifts, as well as progressive policy commitments in manifestos and summits. Yet we have seemingly been unable to break out of the neoliberal policy mould, particularly on macroeconomic matters. The movement was reluctant to confront key centres of economic power. This excessive caution was usually rationalised

by a perverse South African ‘exceptionalism’. The argument was that South Africa, unlike other countries, was unable to be bolder because we were:]& 4(5-8&?$+"&()&,)4(H.,#(O;-&O(;()5-&.4&4.#5-%]& (&%9(;;&5.,)+#>]& ,)(O;-&+.&+(V-&(8H()+(1-&.4&+"-&5.99.8$+$-%&boom

]& #-;$()+&.)&(++#(5+$)1&5(/$+(;&+.&$)H-%+D&

This economic conservatism and political paralysis particularly characterised former President Mbeki’s years at the helm. But it has persisted in the period since 2007, despite rhetoric to the contrary, and despite indications at the 2007 ANC Polokwane Conference that a bolder approach was on the horizon.

What led to the Lula Moment?How did the Lula Moment come about? Brazilian academic Professor Alfredo SaadFilho – a left critic of Lula’s government – acknowledges the progressive impact of the turnaround Lula engineered during his second term. According to his analysis (contained in a landmark interview which inspired Cosatu’s conception of the Lula Moment),6 this political moment was engineered in response to a combination of socioeconomic and political challenges. He argues that President Lula was tainted in

his 0#%+&+-#9&.4&1.H-#)9-)+&M<PPdZ<PPNR&O.+"&by the adoption of neoliberal economic policies, and by growing allegations of corruption in the Workers’ Party and in government. The political right seized on this to attempt to force him out of power:

e,#$)1&F,;(K%&0#%+&(89$)$%+#(+$.)7&5.)%-#H(+$H-&

6 Sue Branford interview with Professor SaadFilho, November 2010 <www.lab.org.uk/brazilexpandingcitizenship>.

0%5(;&()8&9.)-+(#>&/.;$5$-%&/#-H-)+-8&()>&%$1)$05()+&$9/#.H-9-)+&.4&+"-&5.,)+#>K%&%.5$(;&indicators… To cap it all, in the runup to the 2006 elections the administration was battered by a relentless succession of corruption scandals backed up by media and political hysteria which suggested that Lula might be impeached or, at the very least, defeated in his bid for reelection.7

President Lula, together with his allies in the Workers’ Party, the state, and the broader movement acted decisively to turn this situation around. By his second term (2007–2010) they had moved to address key problems in policy as well as in leadership, both in the state and the party. Government and party leadership was changed and important policy shifts were engineered. J"-%-&%$1)$05()+;>&$)5#-(%-8&+"-&$)5.9-%&.4&workers and the poor. Lula regained the support of worker and peasant organisations. By the end of Lula’s second term, surveys put his popular support at over 80%. This high level of support compares to his winning 61% of the ballots in the 2006 presidential elections. Professor SaadFilho outlines how this was

done, particularly in terms of economic strategy:

(Lula) recomposed his top team, decimated by the scandals. Heterodox8 economists and nationalist diplomats aligned with the PT [Workers’ Party] were appointed to head the Ministry of Finance, the Secretariat of Strategic Affairs, and the National

7 Ibid.8 Heterodox economics refers to methodologies or schools

of economic thought that are considered outside of ‘mainstream economics’, often represented by expositors as contrasting with or going beyond neoclassical economics, see <en.wikipedia.org/wiki/Heterodox_economics>.

Lula at the Cosatu Congress, 2012. Photo: Cosatu

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Bank for Economic and Social Development (BNDES), the largest development bank in the world.9

The new appointees were ‘… able to $9/;-9-)+&(5+$H$%+&()8&8$%+#$O,+$H-&0%5(;&()8&0)()5$(;&/.;$5$-%7&()8&+.&9.8-#(+-&+"-&5-)+#(;&bank’s orthodoxy…’. The global commodities boom and buoyant tax revenues facilitated these policies, as did the expansion of social programmes, especially Bolsa Familia. The administration pushed up the minimum wage gradually and consistently, and embarked on a reasonably ambitious ‘programme of growth acceleration’ focusing on investments in infrastructure, transport and energy.10 Y,#+"-#7&$+&$%&(#1,-87&F,;(&9(8-&(&%$1)$05()+&

contribution to progressive advances in Latin America:

Lula’s government has... played an important role in the political stabilisation of Latin America and, in particular, supporting the leftwing administrations in Argentina, Bolivia, Ecuador, Paraguay and Venezuela.11

Despite Lula’s Brazil being regarded by some as fairly centrist in the context of more radical states and movements on the continent, and even H$;$0-8&O>&%.9-&(9.)1%+&+"-&;-4+7&2((8WY$;".&correctly characterises these developments as being important for workers and the poor, despite their limitations:

None of these outcomes is revolutionary, but they are real enough. For these reasons… Lula’s popularity among the poor, and in the poorest regions, is overwhelming.12

This strategic assessment echoes that of the left Landless People’s Movement (MST) in Brazil. Its leader Joao Pedro Stedile, while critical of aspects of Lula’s government, has consistently argued against ultraleft oppositionalism to the Workers’ Party in Brazil. He maintained that left forces must support Lula in advancing progressive elements of his agenda and mobilise against those aspects of his policies with which they disagree. J"-%-&(#-&%.9-&"-(8;$)-&),9O-#%&+"(+&#-G-5+&

achievements in Brazil in less than 10 years:

9 See note 6.10 Ibid.11 Ibid.12 Ibid.

]& Q[&9$;;$.)&4.#9(;&I.O%&?-#-&5#-(+-8&O-+?--)&2003 and 2012

]& unemployment was reduced from 12.3% in 2003 to 5.5% in 2012

]& O-+?--)&<PP=&()8&<PQd7&+"-&#-(;&H(;,-&.4&+"-&national minimum wage increased by 68.4%,13 accompanied by sustained real wage increases, particularly for those in the lower half of the wage structure

]& +?.W+"$#8%&.4&+"-&4(;;&$)&$)-^,(;$+>&4#.9&(&Gini 5.-405$-)+&.4&PD=U&$)&<PPd&+.&PD=n&$)&<PPT&$%&attributed to increases in wages (ILO, 2011)

]& -:+#-9-&/.H-#+>&"(8&O--)&#-8,5-8&4#.9&(;9.%+&30% of the Brazilian population in 1993 to 10% in 2008.14

13 Memo from Leandro Hosie (DIEESE) to author (2 August 2013).

14 Measured as those earning less than US$2 a day; also see OECD, 2010:33.

Lula visits Brazilian Aluminium Company, 2006. Photo: Ricardo Stuckert/PR, Agência Brasil


Banco Nacional de Desenvolvimento Econômico e Social (Brazilian national development bank), Brasilia.


86

How did Brazil do it? The dramatic statistics above beg two questions: How did Lula and the Workers’ Party engineer this transformation? And what are the lessons for South Africa?Three elements appear to be key:

1. macroeconomic policy, and the role of public 0)()5-7&()8&$)8,%+#$(;&/.;$5>

2. transformation of the labour market3. income redistribution and the promotion of domestic demand.

L(4/0#40,0*+4$B0'+4;M$B&7'+4$3,(,4#$(,)$industrial policyBefore discussing the concrete operation of macroeconomic policy in Brazil, it is important to analyse the emergence of two broad economic schools: neo developmentalism and neoliberalism.

Neo developmentalism versus neoliberalism

Brazilian macroeconomic policy has been described either as largely neoliberal in character; or expansionary and stimulatory of productive activity, and domestic consumption. These apparently contradictory interpretations of 9(5#.-5.).9$5&/.;$5>&$)&\#(C$;&G.?&$)&;(#1-&part from what some analysts have referred to as the hybrid economic policy framework. This framework combines an element of conventional neoliberal policy approaches, with a more heterodox ‘neo developmentalist’ economic strategy, which relies on greater state intervention.The growing role of neo developmentalism

was the result of sharp political contestation around the direction of economic policy in the run up to Lula’s second term. Underperformance of the economy, and

8$%(//.$)+9-)+&?$+"&+"-&0#%+&E.#V-#%K&_(#+>&administration’s continuation of neoliberal policies, combined with the strength of heterodox economics in Brazil, brought matters to a head:

In 2005, there was an increasingly loud debate between the neoliberals and their neodevelopmentalist critics, who were shooting from the outside as well as starting to make their presence felt within the public administration through the appointments made by the governing coalition. This debate was eventually won by the neodevelopmentalists. The neoliberal economic team was largely dislocated from positions of

power in the Ministries of Finance, Planning, and Strategic Affairs… (Morais and SaadFilho, 2012:792).

A developmental concept of macroeconomic stability as a springboard for employment, redistribution, etc. was advanced in Brazil, in contrast to a ‘narrow neoliberal goal of monetary stability’. This distinction is interesting in the context of South Africa’s debates where the notion of ‘macroeconomic stability’ has become (&%?-(#?.#8&(%%.5$(+-8&?$+"&5,+O(5V%7&0%5(;&5.)%-#H(+$%97&()8&(&0)()5-W;-8&-5.).9$5&/.;$5>DJ"-.#$%+%&.4&)-.&8-H-;./9-)+(;$%9&#-8-0)-&

the notion of ‘macroeconomic stability’ to include -:5"()1-&#(+-7&$)G(+$.)&()8&O(;()5-&.4&/(>9-)+%&%+(O$;$+>&%,//.#+-8&O>&5(/$+(;&5.)+#.;%7&0%5(;&sustainability, low interest rates and reduction of uncertainties related to future demand. These provide a more stable environment for investment decisions, and require:

5.9/;-9-)+(#>&9.)-+(#>7&0%5(;7&-:5"()1-&#(+-&and wage policies… aiming to restore the power of the state to control the currency, facilitate the implementation of industrial policies, promote competition, and support improvements in the distribution of income (Morais and SaadFilho, 2012:790).

Neo developmentalism stands in sharp contrast with the basic characteristics of neoliberalism, which aims to roll back state intervention because states are regarded as inherently $)-405$-)+D&\#(C$;$()&)-.&8-H-;./9-)+(;$%+%7&on the other hand, argued that mainstream or neoliberal policies had systematically reduced the -5.).9>K%&1#.?+"&/.+-)+$(;D&J"-#-&?(%&%$1)$05()+&underutilised potential in Brazil due to:

unrealized productivity gains that could be captured through economic growth, including economies of scale, higher employment in the formal sector (dislocating lowerproductivity workers), state support to private investment and rapid expansion $)+.&-:+-#)(;&9(#V-+%D&*)&%,97&(5+$H$%+&0%5(;&()8&credit policies could shift GDP growth rates ‘one or two percentage points above the rates expected by the supporters of the neoliberal view’… (Morais and SaadFilho, 2012:791–2).

In contrast, neoliberal critics of the government argued that the interventionist policies the Workers’ Party proposed to pursue would ‘prove

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either useless or counterproductive’. Their views were ‘widely and insistently reported by the national press’. However, larger publicsector investment and expanded social provision had ‘no adverse macroeconomic effects and did not 8-%+(O$;$C-&/,O;$5&0)()5-%K&MX.#($%&()8&2((8WFilho, 2012:793). The successful coexistence of two

apparently incompatible sets of policies has generated perplexity because both mainstream and heterodox commentators had ‘reasonable expectations that this combination of policies is unsustainable’. The argument that this combination was possible merely because of the favourable international economic situation between 2003 and 2008 is refuted by the fact that these hybrid policies ‘continued to deliver positive outcomes even after the 2008 economic crisis’. The Brazilian government responded to the crisis with:]& 311#-%%$H-&5.,)+-#5>5;$5(;&/.;$5$-%7&$)5;,8$)1&higher spending. Stateowned banks dramatically increased the availability of credit to offset the contraction of loans by private institutions.

]& J"-&central bank cut interest rates, deployed US$72 billion to provide export credit and stabilise the exchange rate, and injected ().+"-#&dDdg&.4&he_&$)+.&+"-&0)()5$(;&institutions.

]& Y,#+"-#&-:/()%$.)&.4&+"-&%.5$(;&/#.1#(99-%7&which grew from 6.9% of GDP in 2002 to 8.6% in 2008 and 9.3% in 2009.

]& J"-&%+(O$;$%(+$.)&.4&(11#-1(+-&8-9()8&,)8-#&(8H-#%-&1;.O(;&5$#5,9%+()5-%&(;;.?-8&+"-&0%5(;&8-05$+&+.&#$%-&4#.9&QDTg&.4&he_&(+&+"-&-)8&of 2008 to 4.1% in 2009, while the domestic public debt rose from 40.5% of GDP to 43.0%.

]& 34+-#&()&$)$+$(;&%;.?8.?)7&+"-&economy rebounded, and GDP expanded by 7.5% in 2010 ‘faster than at any time since the mid1980s’ (Morais and SaadFilho, 2012:795).

Lecio Morais and Alfredo SaadFilho argue that two factors explain the ability of this hybrid economic model to sustain itself: the offensive by progressive heterodox economists to roll back the ‘longestablished hegemony of neoliberalism in Brazil’; and the ability of Lula to bring together ‘disparate political and economic agendas’. However, the success of this model is fragile, and

there is the need for a deepening of the economic shifts which have taken place, to avoid them being reversed. Despite the ‘considerable successes achieved by the hybrid economic policies pursued by Lula and Dilma’, this success is ‘nested within a fragile historical conjuncture, which can be destabilized by domestic events or by the -5.).9$5&G,5+,(+$.)%&?"$5"&#-1,;(#;>&O,44-+&+"-&peripheral countries’. They argue that structural changes in the global economy, in particular the shift in the economic centre of gravity to the East, could create the basis for a structural change in Brazilian economic policy, and the ‘permanent bypassing’ of the neoliberal policy framework. The gains achieved since 2006 are more likely to be consolidated if the ‘institutional changes and the macroeconomic policies suggested by the neodevelopmentalist literature are pursued with greater energy’. This could be achieved if ‘neodevelopmentalism becomes the core of a new economic policy consensus in Brazil, involving a redistribution of power’ (Morais and SaadFilho, 2012:795–6).

Understanding Brazilian macroeconomic policy

Debates on Brazilian macroeconomic policy need to be understood in the above context, including 8$%(1#--9-)+%&.)&+"-&5"(#(5+-#&.4&\#(C$;$()&0%5(;&and monetary policy. Interpretation of Brazilian 0%5(;&/.;$5>&$%&9.%+&5.)+-%+-8&O-5(,%-&()(;>%+%K&conclusions when assessing it depend on which indicators are used, and how these are interpreted. Interpretation of monetary policy, however,

appears less controversial. There is agreement that until 2011 Brazilian monetary policy was largely restrictive. This was partly out of popular 4-(#&M8-;$O-#(+-;>&">/-8&O>&+"-&#$1"+7&+"-&0)()5-&sector, and the business media) of returning


Dilma Rousseff receiving the presidential sash from Luiz Inácio Lula da Silva, 1 January 2011. Photo: Fabio Rodrigues Pozzebom/ABr


88

+.&\#(C$;K%&8(>%&.4&">/-#W$)G(+$.)S&()8&/(#+;>&because of the 0)()5$(;&%-5+.#K%&5.)+$),-8&/.?-#D&But with President Dilma’s appointment of a new governor of the reserve bank, the government began to deliberately assert a monetary policy more in line with its developmental agenda. 2$1)$05()+;>7&;$V-&2.,+"&34#$5(7&+"-&\#(C$;$()&central bank is legally independent, so technically 1.H-#)9-)+&$)G,-)5-&.H-#&$+%&8-5$%$.)%&"(%&+.&O-&indirect.As a result, monetary policy became more

expansionary. There was a systematic reduction of real interest rates from around 6% in 2011 to 2% in 2013. This is in contrast to the Lula administration’s earlier years when they were %$1)$05()+;>&"$1"-#&Z&(O.H-&QPgD&6)-&/,CC;-&$%&how up until this point Brazil had managed to follow stimulatory policies, despite prohibitively high interest rates. It may in part be explained by the massive extension of cheap credit by the BNDES.15 This constitutes the major difference with South

Africa, where a ‘slightly more relaxed’ monetary policy is not complemented by the availability of affordable credit for productive investment. 6)&+"-&.+"-#&"()8&()(;>%$%&.4&0%5(;&/.;$5>&()8&

public spending in Brazil differs dramatically, depending on the yardstick used. Analysts focusing mainly on macroeconomic aggregates such as the ‘primary budget surplus’, budget 8-05$+%7&.#&+"-&8-O+oGDP ratio, tend to conclude that Brazil has followed fairly cautious policies. It is true that under the Lula administration, Brazil reduced its budget )$:5!4 (which includes interest payments on debt) from more than 4% of GDP in 2003, to about 2% of GDP in 2008 until the global 5#$%$%&"$+D&J"-&1.H-#)9-)+&+"-)&(;;.?-8&+"-&8-05$+&to grow to over 4%, to allow for aggressive public spending. This approach was pursued until the economy stabilised, and by 2010 the government O#.,1"+&+"-&8-05$+&O(5V&+.&/#-H$.,%&;-H-;%D&The primary budget surplus,16 which Brazil

uses as its main measure (rather than the budget 8-05$+&9-(%,#-&?"$5"&9.%+&5.,)+#$-%&,%-R7&"(8&been maintained at between 3% and 4% of GDP, until the global crisis, when it was allowed to fall to between 1% and 2%, where it currently sits.

15 Other factors are also important, including largescale investment by stateowned enterprises (SOEs).

16 The primary budget surplus (or balance), which Brazil uses as a measure, excludes interest payments on debt.

Debt was also progressively reduced as a percentage of GDP:

from 60.4% of GDP in 2002 to 35.1% of GDP in 2012. This was interrupted only by a temporary increase in 2009 as a result of strong anticrisis %/-)8$)1&M+"-&01,#-&?-)+&4#.9&dUD=g&$)&<PPU&+.&42.1% in 2009) (Schutte, 2014:22).

J"-%-&01,#-%&(//-(#&+.&%,11-%+&(&1#-(+&8-1#--&.4&0%5(;&5.)%-#H(+$%9D&J"-&2.,+"&34#$5()&#$1"+&tries to assert this claim, in attempting to argue that Brazilian successes are allegedly a result of restrictive macroeconomic policies. The message here being that South Africa needs to continue to pursue our own conservative economic policies. However, closer analysis reveals a different

picture. Lula’s government, particularly in his %-5.)8&+-#97&-:/;.$+-8&0%5(;&%/(5-&$)&(&H(#$-+>&of ways to ramp up spending, increase the role of the state in the economy, and actively used expenditure to promote redistribution. J"-&0%5(;&%+#-%%-%&(#$%$)1&4#.9&+"-&/-#$.8&.4&

neoliberalism had led to ‘successive rounds of public spending cuts in order to stabilise the debt/GDP ratio’ and this led to a severe degradation of the country’s infrastructure. To release funds for investment ‘without overtly confronting the neoliberal lobby’, the second Lula administration changed the calculation of the primary surplus, to exclude the SOEs – especially the oil and electricity companies. This allowed SOE investment to quadruple in nominal terms, rising from 1.8% of GDP in the mid2000s, to 2.2% of GDP in 2010 (SaadFilho and Morais, 2014:6). This public investment spree was

supplemented by private investment, mostly directly funded or, at least, guaranteed by the stateowned banks. The government also:

Construction of the Santo Antônio Dam, funding from the Growth Acceleration Programme, 2009. Photo: Marcello Casal JR/ABr

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]& ;(,)5"-8&(&bgrowth acceleration programme’ (PAC) in early 2007, focusing on energy, transport and infrastructure

]& ;(,)5"-8&(&;(#1-&".,%$)1&/#.1#(99-&MbMy Home My Life’), increased funding for education, health and other public services

]& -:/()8-8&+"-&5$H$;&%-#H$5-7&+.1-+"-#&?$+"&%$1)$05()+&/(>&$)5#-(%-%7&$)&.#8-#&+.&b#-5.H-#&policymaking capacity and reduce the number of subcontracted workers in the state sector’

]& %,//.#+-8&+"-&+#()%)(+$.)(;$%(+$.)&.4&%-;-5+-8&8.9-%+$5&0#9%&Mb)(+$.)(;&5"(9/$.)%KR&M2((8WFilho and Morais, 2014:6).

The dramatic expansion in public spending, particularly post 2006, drove both social investment and industrial policy, with the latter drawing heavily on the role of public development 0)()5-&$)%+$+,+$.)%&()8&SOEs. A quantum leap in the tax take available to the Brazilian state enabled this growth in spending. This leap was a result of deliberate policies like the formalisation of employment, and reforms to the tax system, combined with accelerated growth. 3%&%$1)$05()+&(%&+"-&%5(;-&.4&%/-)8$)17&?(%&+"-&changed composition of expenditure in driving redistribution and a wageled economic growth trajectory.

Important indicators

Important indicators of this neo developmentalist approach included:]& \#(C$;K%&/#.1#(99-&.4&aggressively expanding public spending, resulted in it having the highest spending and tax to GDP ratios in Latin America, and higher than 17 Organisation for Economic Cooperation and Development (OECD) countries, including Australia, Canada, Japan, New Zealand, Spain, Switzerland and the United States (OECD, n.d.). Spending peaked at around 40% of GDP. The tax/GDP ratio was progressively increased from 30% in 2001. By 2008 it had reached 35% of GDP (compared to an average of slightly over 25% in South Africa). Public spending was not only facilitated by higher growth levels (an average of 4.4% from 2007 to 2010, compared to 2.1% from 1999 to 2002), but also played a key role in driving domestic demand, on the back of more equitable income distribution.

]& J"-&shift in the prioritisation of spending .4&/,O;$5&#-%.,#5-%&?(%&#-G-5+-8&$)&+"-&increased emphasis placed on social spending, investment in the public sector, and investment in industrial policy. All these areas had suffered serious neglect in the worst years of neoliberalism in Brazil during the decade immediately prior to Lula’s 0#%+&+-#9D

]& \#(C$;K%&stateled industrial policy has famously relied on the key role of the BNDES in extending affordable, subsidised, credit to promote industrialisation. The bulk of the BNDES funding had traditionally come from an earmarked contribution from a workers’ fund, to which all employers have to contribute. But as the Brazilian state ratcheted up the scale of BNDES funding (extension of BNDES credit more than tripled from about US$23 billion in 2003 to around US$80 billion in 201017), so it massively increased direct funding of the BNDES by the national treasury, from 8% of its funding requirements in 2006 to 38% of its funding in 2009. Between 2002 and 2009 around 80% of the BNDES’ loans were channelled to industry and infrastructure (Coutinho, 2010). The scale and focus of these interventions makes the support for industrialisation by South Africa’s Industrial Development Corporation (IDC) and other 8-H-;./9-)+&0)()5-&$)%+$+,+$.)%&MeY*%R&look feeble by comparison.

]& F,;(&#-H-#%-8&+"-&?(H-&.4&/#$H(+$%(+$.)&that battered Brazil in the previous decade. Consequently, the role of public enterprises began to be asserted to a greater degree again. Giant state corporations, such as Petrobras (the state oil company), have played a key role in the development of Brazil, and in Latin America more broadly. From 2010 to 2014, Petrobras has planned annual investments of around US$45 billion in various areas of the economy, only 40% of which are in oil and gas (Coutinho, 2010). Conservative critics of Lula lament that ‘the public sector’s share of the economy climbed from 25 per cent of GDP in the early 1990s to close to 35 per cent in 2005 – 10 percentage points of GDP in 12 years’ (CDE, 2012:4).

17 For ease of reference the amount has been converted in Brazilian Reals on the basis of 1 US$ = 2 Reals.



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]& `-/#$.#$+$%(+$.)&.4&/,O;$5&%/-)8$)1&"(%&%--)&a major increase in social spending, both in absolute and relative terms: Federal social spending (health, social security and income transfers) increased from 13% of GDP in the 1990s, to 23% of GDP by the late 2000s (SaadFilho and Morais, 2014). Contrary to popular perceptions, spending on the Bolsa Familia programme, while important in helping the very poor in Brazil, only constitutes spending equivalent to around 0.4% of GDP. 2$1)$05()+;>7&$)&+-#9%&.4&$)5.9-&+#()%4-#%7&oldage pensions and other grants, such as ,)-9/;.>9-)+&O-)-0+%7&(#-&/-11-8&(+&+"-&;-H-;&of the minimum wage. The scale of pension O-)-0+%&$%&H-#>&%,O%+()+$(;7&5.%+$)1&(#.,)8&10% of GDP (OECD, 2010:63).

]& *)5#-(%-8&%/-)8$)1&.)&+"-&/..#&()8&$)H-%+9-)+&in public services was accompanied by increased spending on public servants. This was both in terms of their number, as well as improving wages and conditions of employment.18 Again the Centre for Development Enterprise (CDE) laments that ‘the growth in current government expenditure has been more than double the growth of GDP in the past 10 years’ (CDE, 2012). When former President Lula addressed the Cosatu central executive committee (CEC)

18 The complement of public servants grew by 25% between 2003 and 2008; see Baltar et al. (2010).

in November 2012, he related that he banned all talk in his cabinet of ‘consumption (versus investment) spending’. He said that the phrase seemed to suggest that spending on the poor (in the forms of grants, public services, etc.) was wasteful when compared to hard investment. His view was that spending on the poor is never wasted. They tend to spend what they receive, thus stimulating the local economy.

There are those, particularly in our Treasury, who may argue that economic policy in South Africa has done similar things particularly post 2000, and therefore constitutes the equivalent of our second Lula period. For example, substantially increasing our tax take, a degree .4&0%5(;&-:/()%$.)7&()8&#-/#$.#$+$%$)1&%/-)8$)1D&J"-#-&9(>&O-&(&%,/-#05$(;&%$9$;(#$+>&$)&%.9-&respects.But any serious analysis of South African

economic policy shows that these similarities mask a huge difference between the South African and Brazilian governments’ approaches over this period. This is both at the strategic level, particularly in terms of the conception of the economic role of the state; as well as the fact that there is a large gap between the size, character, and composition of expenditure in the two countries. This is true whether we look at issues such as social spending, investment in industrial development and credit extension, social protection, or a number of other indicators.

President Dilma at the commemoration of the 10th anniversary of the Bolsa Família Programme, Brasilia, 2013. Photo: Roberto Stuckert / PR, http://fotospublicas.com

91!.9/(#(+$H-&01,#-%&$)&+"-&OECD 2010 analysis of Brazil and South Africa (as well as China and India) dramatically illustrate these differences. Most importantly, while Brazil’s 0%5(;&()8&O#.(8-#&-5.).9$5&/.;$5$-%&"(H-&"(8&a major impact on key social indicators such as inequality, poverty and unemployment, the impact in South Africa on these key indicators has been less than impressive.

A note on industrial policy

There is no doubt that Brazil, unlike South Africa, took effective advantage of the commodities boom. Brazil used it to diversify economic activity and promote formal employment on a large scale. The debate however, is on the extent to which these interventions managed to drive structural transformation of the economy, and lessen Brazil’s dependence on external economic forces. The picture appears mixed. On the one

hand, Brazil managed to consolidate domestic demand and regional interdependence as an important driver of its economic development. It $%&%$1)$05()+7&4.#&-:(9/;-7&+"(+&8-%/$+-&+"-&%5(;-&of its exports, Brazil was able to escape relatively

lightly (when compared for example to South Africa), during the global economic crisis. Brazil managed to create jobs in the face of the crisis. It recorded a net jobs gain in 2009 of over 1,7 million despite a negative GDP growth of 0.6%. South Africa lost over one million jobs, around 10% of formal employment. Brazil was able to use a stateled domestic stimulus to good effect partly because of policies it pursued in previous years.However, the sustainability of this approach

has been questioned in the context of a global economic crisis that has hit commodity prices and exports hard. This is particularly relevant, given that Brazil is the world’s sixth largest economy. It relies on exports of its commodities, as well as manufactured goods, and is heavily dependent on its relations with China. It appears that the success of Brazil’s industrialisation strategy has been mixed – but this needs further study. Table 1 shows that the share of manufacturing

in total employment has stabilised at around 14%. Given that close to 20 million jobs have been created since 2003, this means nearly three million jobs have been created in manufacturing .H-#&+"$%&/-#$.8L&(&%$1)$05()+&(5"$-H-9-)+D&\,+&Giorgio Romano Schutte has suggested that


!(7'#$89$N+-./+7&.+0,$02$I0/5#/-$7;$#40,0*+4$(4.+F+.;M$O/(P+'M$8<G8M$8<<=M$?@@Q$(,)$?@@<

Based on: L. Hosie (DIEESE), presentation to author (September 2012)

Economic Activity 8<G8 8<<= 2004 ?@@<K=1'/%$&%12$L)$'",>&#/HL)-#1,>&1C MNGOP MQGRP SOGQP SQGNPFishery TGUP TGVP TGRP TGQPMining industry TGWP TGRP TGRP TGRPManufacturing industry SQGTP SMGUP SRGSP SUGOPProduction and distribution of electricity, water and gas TGVP TGQP TGRP TGRPConstruction NGSP WGSP WGRP VGQPTrade and repair of vehicles, personal and household goods SRGUP SVGVP SVGWP SNGTPAccommodation and food service (hotels, restaurants and similar) MGRP UGQP UGWP UGOPTransport, storage and communication UGOP UGVP RGVP RGNPFinancial intermediation (.(2(/'2$)>,/&#1< MGTP SGUP SGMP SGMPReal estate, renting and business services UGNP RGNP QGVP WGWPPublic administration, defense and social security RGUP RGNP QGSP QGMPEducation UGOP RGOP QGQP QGVPHealth and social services MGRP MGOP UGRP UGNPOther collective, social and personal services MGNP UGRP RGMP RGUPHousehold services WGSP VGQP VGNP VGOPInternational organisations TGTP TGTP TGTP TGTP5#(X8,.(,8)2/&'"'&',> TGRP TGRP TGTP TGTPTOTAL 100.0% 100.0% 100.0% 100.0%


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The Metropolitan Region of Rio recorded the lowest historical rate of unemployment as measured by the IBGE (Brazilian Institute of Geography and Statistics), November 2013. Photo: André Gomes de Melo, http://fotospublicas.com/

Brazil may be going through a process of ‘reprimarisation’ – meaning a greater reliance on its commodities and ‘relative deindustrialisation’ (Schutte, 2014:22). This is the subject of considerable debate in Brazil.Brazil’s balance of trade in manufacturing has

seriously deteriorated since 2008. This suggests that it has been affected by declining demand for its products, while continuing to be hit by cheap imports, particularly from China. This has led to growing debate in Brazil about the need to act more effectively to deter imports of certain goods; and the need to deepen its industrial policy interventions.The full impact of the global economic crisis,

while initially countered by largescale state intervention, started to be felt in Brazil from 2011/2012, as markets for its products shrank. The economy’s stagnation and slowing down of the gains achieved during Lula’s ‘golden years’ (Schutte, 2014:16) formed an important backdrop to the mass demonstrations that erupted in 2013.

Transformation of the labour market !.%(+,&"(%&#-G-5+-8&(+&%.9-&;-)1+"&.)&+"-&interventions the Lula administration made to transform the Brazilian labour market. It has looked at the implications of the Brazilian experience for the South African situation (Coleman, 2013). The Cosatu paper draws

extensively on a detailed analysis of the programme of labour market transformation published by a team of Brazilian academics (Baltar et al., 2010).It argues that the main interventions in the

Brazilian labour market, which has historically been characterised by high levels of informality, precarity, and low wages, include:]& 3&de facto national wage policy that progressively and substantially increases the real value of the national minimum wage19 as the main means of income redistribution, and combating working poverty.

]& '$1"-#&;-H-;%&.4&-9/;.>9-)+&"(H-&;-8&+.&workers’ and unions’ increased ability to organise and negotiate. This includes the most vulnerable sectors. The negotiating climate changed, reversing the trend that had prevailed up to 2003. ‘Rights are no longer being bargained away in exchange for the maintenance of employment’ (Baltar et al., 2010).

19 Based on the labour movement’s proposed formula to increase the minimum wage by adding the combined increase in GDP over the previous two years to the $)G(+$.)&01,#-D&\(;+(#&-+&(;D&).+-&+"(+&+"-&9$)$9,9&?(1-&does not only affect the formally employed: ‘most of the employees hired informally – unregistered – and some of the selfemployed workers have the minimum wage as a reference point for their remuneration’. The formula also O-)-0+%&/-./;-&%,5"&(%&/-)%$.)-#%7&?".%-&O-)-0+%&(#-&indexed to the minimum wage.

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]& J"-&$)5#-(%-&$)&#-(;&?(1-%&(+&+"-&O.++.9&-)8&of the wage structure and improvement in conditions for collective bargaining ‘cascaded up’ through the wage structure (particularly the lower half), as collective bargaining outcomes demonstrate (see Graph 1).

]& 3&#()1-&.4&$)+-#H-)+$.)%&+.&4.#9(;$%-&+"-&labour market has helped to bring a large number of employers and workers into the tax and regulatory net, and to combat atypical forms of work. This was achieved both through greater regulation, and creation of incentives for employers. An example of this is through attaching conditions to access to credit and procurement opportunities.

]& 3)&$)5#-(%-&$)&?.#V-#%K&$)5.9-%7&5.9O$)-8&with an extension of the social security net, and an increase in the value of grants, has led to a substantial increase in family incomes. The link between wages and social security is close, since pension increases are pegged at the national minimum wage level. The equalisation of urban and rural grants also reduced inequality between different regions.

]& X-(%,#-%&+.&O--4&,/&+"-&;(O.,#&$)%/-5+.#(+-&and to ensure far more effective implementation of workers’ rights have had (&%$1)$05()+&$9/(5+&.)&+"-&9.#-&H,;)-#(O;-&sectors of the labour market.

In South Africa, the National Development

Plan (NDP)’s employment strategy is based on wage repression (lowering the existing wage structure, particularly for entrylevel workers), and the deregulation of aspects of the South African labour market. The Brazilian model has in many respects pursued the opposite approach. While the majority of jobs in Brazil were created at the lower end of the wage structure, this was based on a rapidly rising minimum wage. Since 2000, 90% of new workers (close to 20 million) earned between 1 and 1,5 minimum wages (SaadFilho and Morais, 2014). Therefore gains in raising the national minimum wage were also very important for new workers (in addition to existing workers), who could otherwise have been subjected to the NDPtype model of wage repression.Gay Seidman points out that the increase in the

national minimum wage often translates into an increase higher up the wage structure because the wages of many Brazilian workers are calculated as multiples of the minimum wage (Seidman, 2014). It also increases unions’ leverage in collective bargaining processes, as Graph 1 shows. Thus the policy to progressively increase the value of the national minimum wage has profound impacts throughout the wage structure. Cosatu argues in its Concept Paper (2013)

that we need to emulate the Brazilian approach of integrating our labour market, social protection and wage policies, and align them with a


A/(B"$89$O/(P+'$40''#4.+F#$7(/6(+,+,6$0&.40*#-$8<<R>?@88$

Based on: SAS-DIEESE (2012) Economic policy and labour market in Brazil, presentation to author

Total dos acordos – SAS DIEESE: 100%


94

developmental economic strategy. This approach to transforming the labour market is not unique to Brazil, but is part of a broader trend in progressive Latin American states.20 Baltar et al. argue that improvement in

workers’ conditions, and the promotion of decent ?.#V&$)&\#(C$;&%$)5-&<PPn7&$%&#-G-5+-8&$)&+"-&increase in protected work, the raising of the minimum wage, the recovery of the average wage, a drop in open unemployment and curbs on unprotected subcontracting. Labour market and social protection policies have promoted a considerable reduction of poverty, and inequality. But they note that a number of structural problems remain, such as:

high labour turnover, informal employment, structural unemployment and the strongly heterogeneous nature of the occupational structures (Baltar et al., 2010:32).

The Brazilian labour market is a complex regime, with apparently contradictory features. The degree of labour market regulation and protection of workers in Brazil is often regarded as quite high (see OECD, 2010:270). Yet employers are apparently able to dismiss workers with little restriction, leading to a massively high turnover. At the same time, workers are protected by a social security fund: employers dismissing workers ‘without reason’ have to pay a penalty equivalent to 40% of their accumulated contribution into this fund.21 `,>&\#(1(&M<PQnR&$8-)+$0-%&+"#--&4-(+,#-%&

of the Brazilian labour market which suggest the continued prevalence of cheap labour and vulnerable work particularly in key economic growth sectors, such as services:]& 8-%/$+-&$)5#-(%-%&$)&+"-&9$)$9,9&?(1-&+"-#-&is a high concentration of lowpaid jobs, particularly in new employment

]& 8-%/$+-&$)5#-(%-8&;(O.,#&9(#V-+&#-1,;(+$.)7&there is a high turnover of workers

20 On this see Cook and Bazler (2013). The South African trade union delegation to the International Labour Organization (ILO)’s International Labour Conference in 2012 was struck by the extent to which this progressive perspective on labour market transformation was advanced by the Latin American government delegation in debates on related issues (in the committee on youth employment).

21 Employers pay a monthly contribution of 8% of the workers’ salary into a social security fund. Interview with Leandro Hosie, DIEESE (25 September 2012).

]& 8-%/$+-&4.#9(;$%(+$.)&.4&+"-&;(O.,#&9(#V-+7&there is an increase in the rate of outsourcing and contracting out.

Braga therefore reminds us that although %$1)$05()+&$9/#.H-9-)+%&9(>&"(H-&+(V-)&place for workers and the poor in Brazil, it is from a very low base. There are also certain countervailing tendencies in the labour market. Acknowledging improvements should not mean romanticising workers’ conditions. Nor, however, should we deny real gains.E-&"(H-&(;#-(8>&8-(;+&?$+"&+"-&0#%+&+?.&

points of lowpaid jobs and high turnover. On the issue of outsourcing, it has been suggested that subcontracting is rising in SOEs, large private companies and in the services sector, and that such workers earn 40% to 60% less than their peers performing similar tasks (SaadFihlo and Morais, 2014).Having said this, it is important to recognise

that the challenge of atypical work and labour brokering is on a far smaller scale than experienced in South Africa. According to Baltar et al. temporary contracts

have a low incidence, representing only 1.4% of total employment in the private sector. In the public sector, especially at the municipal level, there was an increase in temporary contracts, particularly before 2003. However after 2003, in relative terms, there was a decrease in hiring of temporary and dismissible staff, especially at the federal level. They argue that there was no increase in atypical contracting in Brazil in the private sector. However, they acknowledge that despite increasing formalisation, ‘the labour market still features some characteristics that are very unfavourable to the employees’ (Baltar et al., 2010:19). The lack of a majority in Congress prevented

Lula from piloting a comprehensive labour law reform proposal, as it was blocked by opposition parties and employers (Cook and Bazler, 2013:17).Nevertheless, the improvement in labour

market conditions for workers in Brazil, including growing employment opportunities, greater formalisation and regulation, has reportedly led to the increased ability of workers +.&01"+&4.#&+"-$#&#$1"+%&$)&+"-&9.%+&-:/;.$+-8&sectors, such as domestic work. Also, Brazil "(%&%+-//-8&,/&-44.#+%&$)&+"-&;(%+&8-5(8-&+.&01"+&

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against child labour, and practices which are tantamount to slave labour. Nevertheless, the Brazilian government, and labour movement, have a huge task, given the brutal legacy of cheap labour, and forced labour, in making the goal of decent work a reality for all working people.

Income redistribution and the promotion of domestic demand

In the past the economy grew but there was no distribution of wealth. We wanted to prove that both could happen together. Once we put money in the hands of the poor, they started buying goods, more of which needed to be produced. When the poor earn, they spend and create jobs. It is the opposite with the rich. When workers and the poor started spending, the giant wheels of the Brazilian economy started turning.22

Y.#&+"-&0#%+&+$9-&$)&+"-&Global South, and certainly in recent decades (with the possible exception of post2003 Argentina), Lula’s Brazil succeeded in engineering a massive leftKeynesian experiment, of harnessing effective demand for goods to drive economic development. Raising demand has been a key element of its wageled growth path. At the same time, it has been the combination of its demandinducing income redistribution strategy, and its supplyside industrial strategy, which has produced the virtuous cycle of expanded production and growing demand. The BNDES’s statistics demonstrate that,

while (lack of) domestic demand had been a negative economic factor in Brazil before 2003, domestic demand accounts for the major part of economic growth in the Lula years. Graph 2 shows that growth in domestic demand has accounted for the vast majority of GDP growth between 2002 and 2010. And that in four years M<PPN&+.&<PPU7&()8&<PQPR&?"-#-&%$1)$05()+&growth had taken place, net external demand was negative. This meant that Brazil would have experienced a far lower growth rate if domestic demand had not increased. Importantly, the growth in domestic demand in 2010 was the key factor in Brazil’s economic recovery post the 0)()5$(;&5#$%$%D&J"$%&$%&?"-)&+"-&-5.).9>&1#-?&by 7.5%.

22 Former President Lula, addressing the Cosatu CEC (November 2012).

This growth in demand was mainly driven by four factors: 1. rising real wages2. increased social protection3. phenomenal growth in employment (itself spurred by rising demand)

4. extension of cheap credit to the poor. All four of these economic dynamics were

redistributive in character: they put new income mainly into the hands of the poor and workers at the bottom end of the income distribution. The exponential increase in demand is

attributed to the rapid rise in the minimum wage, the 25% increase in the value of transfers to pensioners, the unemployed and the disabled between 2002 and 2009, the quadrupling of personal credit, which rose from 24% of GDP to 45%, while mortgage lending expanded from R$ 26 billion in 2004 to R$ 80 billion in 2009 (SaadFilho and Morais, 2014). The extent of income redistribution during

the Lula years is made more dramatic by the fact that from 2003 to 2010, the bottom 10% and 20% increased their income by 70% and 60% respectively, while the top 10% increased their income by 10% (Schutte, 2014). From the viewpoint of economic sustainability,

it was also important that, unlike the consumption bubble in the United States of America (USA) and elsewhere (including South Africa), which was driven by unsustainable debt, increased 5.)%,9/+$.)&$)&\#(C$;&?(%&+.&(&%$1)$05()+&8-1#--&based on rising incomes, rather than purely on credit. Nevertheless, Brazil has faced a challenge of growing indebtedness, as working people have


Graph 2: Growth in domestic demand

Source: BNDES, Coutinho, 2010

6#Y,>&'/)Y21H,&),?B$2'(>)MTTRXMTTN)=1#Z&@)/C/$,)and 2010 recovery


96

begun to access goods that were previously out of their reach.23 The Brazilian experience shows that there is

an important relationship between the level of domestic demand and possibilities for economic 8$H-#%$05(+$.)&()8&$)8,%+#$(;$%(+$.)D&!.)H-#%-;>&the extent of poverty in South Africa, and the Southern African region, means a major repression of domestic demand. This puts a serious brake on the productive sector’s ability to achieve economies of scale in producing for the domestic market. The Southern African Development

Community (SADC) is a similar size in population as Brazil (comprising over 200 million people). A conscious strategy to raise incomes and aggregate demand in South Africa and the region could form an important element of a new development model. A wage and employmentled growth strategy in Southern Africa would release pentup demand for people’s basic needs from a low base. An aggressive stateled industrial strategy, supported by appropriate macroeconomic policies, could enable the rapid development of the productive supply side to tap into this wave of domestic demand.

What can SA learn from Brazil? Lessons from Brazil relating to socioeconomic transformation help to cast light on key debates that have taken place in South Africa, particularly inside the ruling alliance, over the last 20 years. These debates are now unfolding further with the tabling of the NDP. An important theme that emerges from

our analysis of Brazilian interventions in the economy, is the ability of the movement to navigate the global and domestic economic situation, not as a passive spectator, but as an active player shaping a dynamic balance of forces. Key in this regard is how the Brazilian ruling party has related to: the state; social movements; and capital.

The state In South Africa, key economic institutions such as the Treasury, the South African Reserve

23 However, in a note to the author, Professor SaadFilho points out that banks in Brazil are more heavily regulated than in the USA, and no trading of debt is allowed.

Bank, DFIs and major SOEs remain largely untransformed. ‘Transformation’ has been largely limited to the introduction, to a certain extent, of black leadership into these institutions, but without a change of paradigm, or mandate.24 The culture of neoliberal economics and practices remains powerful. These economic centres in the state have been important advocates of the notion of a South African ‘exceptionalism’, ?"$5"&(;?(>%&%--9%&+.&0)8&#-(%.)%&?">&$+&$%&).+&possible for the South African state to tamper with economic power relations. These perspectives have been challenged

within the broader alliance, and are increasingly contested by more progressive centres within the state (such as in the departments of trade and industry, and economic development). But neoliberal economic perspectives have rooted themselves within the leadership cadre of the ruling party, and remain powerful. This dynamic has a material basis in class formation within the state and ruling party, and the ‘grand compact’ between the 0)()5$(;&%-5+.#&()8&+"-&)-?&-;$+-D&These groups have, in essence, agreed not to challenge these economic power relations, in exchange for a minority stake in this historically white enclave, through the vehicle of black economic empowerment (BEE).In Brazil, it appears that these old elites in

the state and the 0)()5$(;&%-5+.#&8$8&).+&-:-#5$%-&$)G,-)5-&.H-#&+"-&Workers’ Party to the same extent as in South Africa. It took President Lula only four years to overhaul the leadership of many key economic institutions in Brazil, and to redirect their mandate. As discussed in this chapter, the Workers’ Party deliberately deployed prominent heterodox economists who were available to take up positions in these institutions. J"-#-&?(%&(&%$1)$05()+&8$%/;(5-9-)+&.4&)-.;$O-#(;&-5.).9$%+%K&$)G,-)5-&$)&+"-&%+(+-7&()8&(%%-#+$.)&.4&economic alternatives. The Brazilian experience shows that, with the

necessary political will, it is possible to engineer the required transformation. The Brazilian

24 It would be more accurate to say that in most instances, transformation that has taken place in these institutions, has taken them away from a developmental mandate. An example is the commercialisation of key SOEs, and some DFIs, such as the DBSA. On the other hand, there are currently attempts to reshape the mandate of the IDC, and the competition authorities, to advance a more aggressive industrial strategy. But this is still in its early phases.

97

leadership showed admirable courage and focus on this front. This despite the fact that they had to exercise it in a relatively less favourable political situation, and without the huge majorities for the ruling party that we enjoy in South Africa.Preparedness to change the strategic direction

of key state institutions gave the Workers’ Party access to important levers. This enabled them to tamper with the markets in strategic areas in order to drive a national development project. There is nothing intrinsic to the South African situation (or unique about Brazil), which in principle prevents us from similarly harnessing state institutions. This can be done in areas such as: ]& 9(%%$H-&-:+-)%$.)&.4&(44.#8(O;-&5#-8$+&4.#&/#.8,5+$H-&(5+$H$+>&+"#.,1"&%+(+-&0)()5$(;&institutions

]& (11#-%%$H-&+(:(+$.)&()8&0%5(;&/.;$5$-%&to rapidly expand social spending and investment, and promote redistribution

]& +"-&$)+#.8,5+$.)&.4&5(/$+(;&5.)+#.;%&+.&9()(1-&5,##-)5>&H.;(+$;$+>&()8&%/-5,;(+$H-&5(/$+(;&G.?%

]& -:/()%$.)&.4&+"-&-5.).9$5&#.;-&.4&SOEs in advancing the state’s industrial and investment strategy

]& $)+#.8,5+$.)&.4&(&)(+$.)(;&?(1-&/.;$5>&+.&promote rising incomes and greater equity

]& 5.9/#-"-)%$H-&;(O.,#&9(#V-+&#-1,;(+$.)&+.&promote formalisation of employment

]& +"-&/#.9.+$.)&.4&5.9/#-"-)%$H-&%.5$(;&protection to combat poverty.

To implement these measures, South Africa would require preparedness to challenge key economic interests, particularly those of the 0)()5$(;&%-5+.#7&()8&+.&9.O$;$%-&(&)(+$.)(;&/#.I-5+&for development of the real economy. But this was also true in Brazil where much economic transformation was driven in alliance with important sections of Brazilian capital, as will be seen below.

Social movements The jury is out on the extent to which the Workers’ Party mobilised social movements and trade unions to drive the transformation project in Brazil. Unlike some other left Latin American movements, Cosatu has argued that the Brazilian project has tended to be too topdown, and overreliant on the state.25 This view, however, is contested by our colleagues in the Brazilian labour movement.Available information is slightly contradictory.

On the one hand, under President Lula, a range of participatory processes were initiated. J"$%&%,11-%+-8&(&%$1)$05()+&8-1#--&.4&9(%%&participation in policy and decisionmaking. The people’s participation in budgeting processes in Porto Alegre is one famous example. Another

25 See Cosatu Political Report to the 11th National Cosatu Congress, 2012.


Residents gather for the annual Regional Participatory Budgeting assembly. Participatory budgeting has been practised in Porto Alegre, Brazil, since 1989. Photo: Courtesy Michael Fox


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more comprehensive policy process is regular sectoral policy ‘conferences’. It is claimed that these involve civil society in all areas of public policy in all regions of the country. In these conferences civil society organisations jointly convene mass policy forums with government.According to the Brazilian national labour

federation CUT,26 numerous conferences are convened on a host of policy issues at the municipal level. These include issues like food, employment, youth, rural development, and the needs of disabled people. They are followed by state level conferences. Every four years the various sectoral conferences are held at a )(+$.)(;&;-H-;D&J"$%&0)(;;>&8-+-#9$)-%&/.;$5>D&CUT argues that this model of participatory democracy works well. The obvious question, however, is if this participatory process is so effective, how did discontent with policies in areas such as transport, health and education build up to such an extent that it resulted in mass explosions of protest in June 2013? Having said this, government’s response to the mass protests showed preparedness to take people’s grievances

26 Interview with the CUT deputy general secretary Maria Godoi Faria (25 September 2012). She said that CUT was directly involved in organising conferences on industrial sectors, rural areas, the public sector, and trade and services.

seriously, and to act quickly, even though President Dilma is alleged to be far less inclusive in her style of leadership than Lula was.Nevertheless, it appears that there is certainly

greater union support for government economic policy in Brazil than in South Africa. The trade ,)$.)&9.H-9-)+&$)&\#(C$;&#-1(#8&%$1)$05()+&elements of policy as being the direct result of their input. For example, the unions are reported to have been directly involved in the formulation of policy on the national minimum wage and the formula for its increase,27 aspects of the social protection system, and the package of measures introduced to combat the economic crisis. On the other hand, it is well known that certain

progressive organisations, such as the MST, are very unhappy with the Brazilian government’s policy approach, for example regarding land issues. Because of the problem of accessing analysis about Brazil in English, it has been 8$405,;+&+.&1-+&9.#-&8-+($;-8&$)4.#9(+$.)&.)&+"$%&question. It would therefore be useful to further investigate the functioning of participatory democracy in Brazil.

27 Maria Cook (Cook and Bazler, 2013) argues that this required extensive mobilisation by the Brazilian labour movement.

The Central Única dos Trabalhadores (CUT) is an umbrella organisation of thousands of local trade unions around the country. The CUT was founded in 1983. Photo: Agência Brasil

99

Capital A major question facing any progressive transformation project under capitalism is how the popular forces relate to the capitalist class and its component parts. It is widely recognised in Marxist literature that different sectors or ‘fractions’ of capital have different immediate interests in certain respects. And that this leads to the emergence of secondary contradictions within the capitalist bloc. This has arguably become even more important with: ]& +"-&0)()5$(;$%(+$.)&.4&+"-&1;.O(;&-5.).9>]& +"-&-#,/+$.)&.4&+"-&<PPU&0)()5$(;&5#$%$%]& (&1#.?$)1&#-(;$%(+$.)&+"(+&-;-9-)+%&.4&5(/$+(;&primarily concerned with the real economy, particularly national capital, in broad terms tend to have divergent interests with those elements of capitalism, particularly 0)()5$(;&capital and transnational capital, driving a fundamentalist neoliberal agenda.This secondary contradiction within capital

has been an important feature of the Brazilian national development project. It has been argued that a key social force supporting Lula and the Workers’ Party in 2002, and again in 2006, was the Brazilian national bourgeoisie, which was focused on the real economy. The ‘neoliberal O.,#1-.$%$-K7&5.9/#$%-8&.4&0)()5-&5(/$+(;&()8&international capital active in Brazil, opposed Lula. They supported his opponents’ and predecessors’ neoliberal agenda in all its known forms, including privatisation, liberalisation, and dismantling of state capacity.The Brazilian ‘internal bourgeoisie’ have a

contradictory relationship with neoliberalism. They are unhappy with many of its elements, and rely on state support in terms of credit, low interest rates, promotion of domestic demand, preferential state procurement, and +"-&#-1,;(+$.)&.4&+#(8-&()8&5(/$+(;&G.?%D&E"$;-&naturally uncomfortable with minimum wage and social protection policies, they recognise that these promote social cohesion and increase domestic demand. To this extent the internal bourgeoisie constituted a major base of support for Lula’s project, and enormously expanded the political space available to the Workers’ Party. Therefore, it is argued, the policies the Workers’ Party implemented brought together the internal bourgeoisie’s interests with those of the broad working class (SaadFilho, 2013).

This aspect of the Brazilian experience is directly relevant to South Africa. It connects with debates that have raged in the ruling alliance over the last two decades. It raises the strategic question as to what elements of capital we primarily want to relate to, our agenda for that relationship, and how to ensure support for a national development project biased towards the working class. Conversely, how to isolate the most reactionary elements of capital who have no interest in the real economy, or the development of the country per se.

Space for South African’s Lula MomentSouth Africa’s 1996 neoliberal blueprint Gear, as with Brazilian neoliberalism, was predicated, amongst other factors, on: deregulation, liberalisation of trade and labour markets, cutting back state spending, and privatisation. Its assumption was that this formula would lead +.&+"-&)-5-%%(#>&$)H-%+9-)+&G.?%7&()8&?.,;8&help South African capital to internationalise and become competitive, freeing it from the shackles of years of ‘protectionism’.Intellectual precedents in certain quarters

of the ANC prior to Gear had also argued for minimal state intervention in the economy, and the need to adopt marketfriendly policies to attract investment, as necessary precursors to development. In particular a 1994 document believed to have been drafted by former President Mbeki, aptly titled E"70")04$)(F$#$54!'"9, and followed by a 1996 ANC document called State and Social Transformation put major emphasis on this relationship with capital. The latter argued that:

the globalisation of the world economy reduces the sovereignty of each national economy… the bulk of capital, as investible wealth, is in private hands… capital operate(s) internationally, unconstrained by questions of boundaries of national states or the sovereignty of these states… Consequently, the democratic state has an obligation to harness this driving force to ensure that the democratic state and capital act in concert… (Cosatu, 2002:17).

One of the responses to this school of argument was contained in a Cosatu document titled Theory of the Transition published in February 2002. It argued that while a national



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project may need to reach some form of accommodation with elements of capital, this should be distinguished from a relationship which entailed subordination to it, and that such (&%,O.#8$)(+-&#-;(+$.)%"$/&?(%&+>/$0-8&O>&+"-&neoliberal Gear programme. The Cosatu document also began to signal

the need to engage elements of capital around a national development agenda:

Recent developments have… continued to raise questions about both the cohesion and strength of South African capital, and the belief that they respond positively to promotion of a ‘marketfriendly investment environment’… The main focus of big capital in South Africa has been .)&$+%&$)+-#)(+$.)(;&8$H-#%$05(+$.)&%+#(+-1>k&Y.#-$1)&5(/$+(;&G.?%&%+$;;&#-9($)&;(#1-;>&4.5,%-8&on shortterm speculative capital, which only serves to increase economic volatility, and does little for economic development… (Capital) appears increasingly divided and uncertain about its direction (and) is beginning to realise that it is untenable for things to continue in the old way. In particular, the future of capitalism itself is seen to be in jeopardy, with continued mass unemployment, and high levels of poverty and inequality, potentially leading to a social explosion… divisions in organised business demonstrate the need for labour and government to act decisively to lock capital into a new agenda (Cosatu, 2002:18–9).

Is it possible in South Africa, as appears to have

happened in Brazil, to lock capital (or elements of it) into a new national development agenda? 3&9.8-%+&O,+&%$1)$05()+&(++-9/+&?(%&9(8-&$)&early 2010 to lay the basis for such a platform. With the recent adoption of a set of industrial (and other) policies more favourable to the productive sector, conditions were more conducive for some type of agreement with South African companies committed to real investment. The problem remained the persistence of inappropriate 9(5#.-5.).9$5&/.;$5$-%7&?"$5"&(5+-8&+.&%+$G-&development of the real economy. Cosatu took the initiative, together with a

group of South African manufacturers known as the Manufacturing Circle, to negotiate a Declaration agreeing on economic interventions required to place South Africa on a new growth path. These included, among others: ]& (&5(;;&4.#&9(5#.-5.).9$5&/.;$5$-%&9.#-&supportive of industrialisation

]& 9-(%,#-%&+.&%+(O$;$%-&+"-&5,##-)5>&(+&(&competitive level

]& #-8,5+$.)&$)&#-(;&$)+-#-%+&#(+-%&()8&+"-&$)+#.8,5+$.)&.4&5.)5-%%$.)(;&0)()5-

]& /#-4-#-)+$(;&/#.5,#-9-)+&O>&+"-&%+(+-&()8&(;;&SOEs and DFIs to promote local industries

]& 8-/;.>$)1&+"-&$)4#(%+#,5+,#-&$)H-%+9-)+&programme to develop new local capacity

]& %+(+-&$)+-#H-)+$.)%&+.&#-H$H-&()8&/#.9.+-&+"-&manufacturing sector.

Protester pleads with military police during street protests, Rio de Janeiro State, 2013. Photo: Marcos Cunha, Wikimedia Commons

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It also called on all departments for b,)^,(;$0-8&%,//.#+K&4.#&+"-&Industrial Policy Action Plan, a coded reference to the continued reluctance of Treasury, and other centres of neoliberal economic power, to support the plan.28 This Declaration could have been drafted in

Lula’s Brazil, and contains many similar policy interventions on which the Workers’ Party and employers agreed. While some headway has been made in taking forward elements of the Declaration, progress in transforming this into a serious national platform is hampered by two V->&$%%,-%L&0#%+;>7&+"-&5.)+$),-8&8.9$)()5-&.4&Treasury and other neoliberal economic centres in the state; and secondly, domestic manufacturers’ lack of clout. Finance continues to dominate organised business, and therefore engagement to take this agenda forward in forums such as National Economic Development and Labour Council (Nedlac) has not been warmly received.The NDP takes South Africa in the opposite

direction to this developmental vision: it proposes to entrench neoliberal economic policies, deregulate the labour market, and proposes a social accord which would entrench the perpetual subordination of labour.29 South Africa does have space to forge its

own Lula Moment in terms of socioeconomic transformation. But the window is rapidly closing. The ruling alliance and the labour movement need leadership to forge a national platform for development. This would include a programme of mass participation and mobilisation; action to transform state institutions in line with our developmental vision; and a clear proposal to engage elements of business that make up the real economy to forge a true national development compact.Finally, it would be important to take forward

Cosatu’s proposed initiative, supported by President Lula, the Workers’ Party and CUT, to %"(#-&-:/-#$-)5-%&()8&#-G-5+&8--/;>&.)&%.9-&.4&the innovative approaches adopted in Brazil, as well as challenges which are currently unfolding in both our countries. !

28 Also supported by the two other major trade union federations, the ‘Declaration on Industrial and Economic Policy: interventions needed to created decent jobs’ is available at <http://www.cosatu.org.za/show.php?ID=3309>.

29 For Cosatu’s critique of the NDP, see <http://www.cosatu.org.za/docs/discussion/2013/NDPcritiquesummary.pdf>.

AcknowledgementI want to thank various people who have helped me understand the nuances and complexity of the Brazilian experience, and transcend the language barrier. Comrades from the Brazilian Workers’ Party and CUT in São Paulo, as well as CUT’s research institution, DIEESE, met with me and pointed me in the right direction, as did various Brazilian intellectuals based at the progressive economics centre at the University of Campinas. An individual who needs special mention is Professor Alfredo SaadFilho of the School of Oriental and African Studies (SOAS), a leading expert on Brazil, who made helpful comments on two drafts of this chapter. His profound work on Brazil’s political economy has been invaluable in helping me to navigate a sometimes bewildering


Neil Coleman has been involved for many years in policy development work. He co-ordinated a team which drafted over 250 submissions on policy and legislation

to parliament and government departments between 1995 and 2007. From May to December 2009, Cosatu seconded him as special advisor to the minister of economic development. Neil has participated in numerous and varied national political and social dialogue forums, including in the alliance, the ANC, and the National Economic Development and Labour Council (Nedlac); and participated in many Cosatu delegations, and a wide range of conferences and forums both nationally and internationally.Whilst he has headed several departments in the Cosatu over a period of 24 years, !")0(.!"-+O1&%'(;&+2%$0!%3*"'%$>+1#,)*+%".+communications department, he is currently strategies coordinator of the Cosatu secretariat. This involves coordinating various teams of experts for the federation, including working with the country’s top progressive economists.


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landscape. I also want to thank Zwelinzima Vavi, the general secretary of the Congress of South African Trade Unions (Cosatu), for his consistent support for the view that we need to invest energy and resources into learning from the Brazilian experience, and giving me leeway to pursue that enterprise.

References

Baltar et al. (2010) ‘Moving towards decent work. F(O.,#&$)&+"-&F,;(&1.H-#)9-)+L&#-G-5+$.)%&.)&recent Brazilian experience’. GLU Working Paper 9 (May).

Braga, R. (2014) ‘Brazil: limits of a precarious development model’. A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

!eBD&M<PQ<R&b`-G-5+$)1&.)&\#(C$;K%&%,55-%%D&How durable? What lessons for South Africa?’ (September).

Coleman, N. (2013) ‘Towards new collective bargaining, wage and social protection strategies in South Africa Learning from the Brazilian experience’ Global Labour University Working Paper No. 17, ILO <http://www.ilo.org/actrav/WCMS_231477/langen/index.htm>.

Cook, M. and Bazler, J. (2013) ‘Bringing unions back in: labour and left governments in Latin America’. Cornell University Working Paper 4 (April).

Correa, V.P., dos Santos, C.H. and Filho, N.A. (2013) ‘Structural changes in Brazil –advances and limits’ <iippe.org/wp/wpcontent/.../IIPPE2013_VanessaPetrelliCorreaetal.pdf>.

Cosatu. (2002) ‘Theory of the transition’.

Document for bilateral with the ANC (February) <http://amadlandawonye.wikispaces.com/Theory of the Transition, Cosatu, Feb 2002>.

Coutinho, L. (2010) ‘BNDES challenges for industrial policy, innovation and competitiveness in Brazil’ (July).

ILO. (2011) ‘G20 Policy Brief on Brazil’ (September).

Morais, L. and SaadFihlo, A. (2012) ‘Neodevelopmentalism and the challenges of economic policymaking under Dilma Rousseff’. Critical Sociology 38(6).

OECD. (2010) ‘Tackling inequalities in Brazil, China, India and South Africa: the role of labour market and social policies’ <http://www.oecd.org/southafrica/tacklinginequalities$)O#(C$;5"$)($)8$(()8%.,+"(4#$5(W+"-#.;-.G(O.urmarketandsocialpolicies.htm>.

OECD. (n.d.) ‘Revenue Statistics in Latin America 1990–2010’ <http://www.oecd.org/ctp/taxglobal/revenuestatisticsinlatinamerica.htm>.

SaadFilho, A. (2013) ‘Brazil: Development strategies and social change from ISI to the events of June 2013’. Unpublished paper.

SaadFilho, A. and Morais, L. (2014) Mass Protests: Brazilian Spring or Brazilian Malaise.

Schutte, G.R. (2014) ‘Brazil: 10 years of a Workers’ Party government’. A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

Seidman, G. (2014) ‘New citizenship rights for the poor’. A Lula Moment in South Africa? Lessons from Brazil. Johannesburg: CHI.

8"-012)2/'R#$(%/'3)BC/)Paulo, Brazill, 2006. Photo: Mario Roberto Duran Ortiz Mariordo, Wikimedia Commons

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AAdler, Glenn 56African National Congress (ANC)

2, 8, 9, 11, 12, 13, 48, 51, 53, 54, 69, 78, 82

1994 Unmandated Re!ections 991996 State and Social Transforma-

tion 992007 Polokwane conference 59,

72, 75, 842012 national conference 72, 75banning 52, 53early history 48, 51, 52, 53government 71national executive committee

(NEC) 11negotiations 53neoliberal ideology 48policies 12, 13, 48, 71social democracy 59unbanned 2, 53

Africans’ Claims 48, 49, 50, 51. See also"ANC early history

Alexander, Peter 73Allende, Salvador 16American Declaration of Independ-

ence 50apartheid 2, 12, 51, 53, 55, 56,

57, 69, 73post-apartheid South Africa 14,

51, 53, 54, 56, 58, 59, 68, 73, 74, 75, 76

Atlantic Charter 49, 50, 51

BBanco Nacional de Desenvolvimento

Econômico e Social (BNDES) 5, 21, 25, 26, 83, 85, 88, 89, 95

Barbosa, Nelson 21Bentley, Kristina 75Berg, Janine 9, 44black economic empowerment

(BEE) 96Bolsa Familia 17, 20, 24, 34, 35,

41, 64, 82, 85, 90Brady Plan 22Braga, Ruy 11, 38, 94Branford, Sue 84Brazil

2013 street protests 11, 32, 66, 92, 98. See also"June Move-ment

agriculture 8, 35, 40, 91farm of the world 4food production 4small farmers 4, 5, 11, 17

economy 24, 40, 43, 62, 82, 83, 86, 87, 88, 89, 90, 91, 92, 95, 96, 99

education 4, 5, 11, 17, 25, 32, 36, 37, 40, 89, 91, 98

attendance 42, 64public schools 24quota system 25universities 4, 11, 25

#nancial sector 17, 83, 88, 91, 96, 99

manufacturing 21, 22, 27, 29, 40, 91, 92

manufacturing trade de#cit 28mining 8, 12, 35, 37, 40, 91public sector 89, 90, 94, 98services sector 36, 94state pension 10, 17, 20, 23, 34,

35, 42, 43, 82, 90, 92, 93, 95

Brazilian Socialist Party 16

CCaixa Federal 21, 24Callinicos, Luli 8Cardoso, Fernando Henrique 8, 10,

18, 20, 21, 40, 41Central bank 17, 28, 29, 34, 83, 87Central Única dos Trabalhadores

(CUT) 2, 3, 8, 32, 98, 101national labour federation 2, 98research institution 37, 101. See

also"DIEESECentre for Development Enterprise

(CDE) 90CGIL. See"General Confederation of

Labour (CGIL)Chamber of Business 56Chamber of Mines 56Chang, Ha Joon 83China 4, 22, 27, 28, 29, 62, 77,

91, 92China e$ect 20

Chomsky, Noam 16Chris Hani Institute (CHI) ii, iv,

8, 14roundtable iv, 9, 12, 41

Churchill, Winston 49Civil society

Brazil 2, 4, 18, 20, 98South Africa 13, 53, 54, 57, 72,

73, 74, 77Cold War 2, 8Coleman, Neil 13, 81, 101collective bargaining 9, 37, 40, 93Collor, Fernando 34Communist Party of Brazil 16Congress of South African Trade

Unions (Cosatu) 2, 8, 9, 45, 53, 56, 57, 69, 70, 71, 75, 84, 92, 97, 99, 100, 101

INDEX


104

1993 Cosatu Congress 32012 Congress 9, 83, 97central executive committee (CEC)

90, 95Concept Paper (2013) 93Industrial Policy Action Plan 101policy 53, 57relationship with Tripartite Alli-

ance 69, 71, 72Congress of the People 51. See

also"Freedom CharterConvention for a Democratic South

Africa (Codesa) 2, 53, 58Cook, Maria 98Cronin, Jeremy 71, 74

DDawson, Brett 76de Oliveira, Francisco 34, 35Departamento Intersindical de

Estatística e Estudos Socioec-onômicos (DIEESE) 37, 85, 94, 101

Development Bank of Southern Africa (DBSA) 5, 6, 96

development #nance institutions 65, 89, 96, 100

Dirceu, Jose 18domestic workers 36, 40

EEach One, Hire One 76, 77Education. See"Brazil education and

South Africa educationElections

Brazil 82002 elections 16, 18, 30, 34,

822006 elections 18, 35, 842010 elections 24, 30, 822014 elections 29, 32

South Africa 13, 481943 elections 511958 elections 52#rst democratic, 1994 3, 12, 53,

54, 55, 56, 57, 58, 67

FFaria, Maria Godoi 98Ferreira, Sergio Xavier 3, 6FIFA World Cup 12

Brazil 2014 12, 30, 31

FIFA Confederations Cup 31, 32Foreign Direct Investment 29Freedom Charter 48, 51, 52, 53

GGeneral Confederation of Labour

(CGIL) 2, 3Gini coe%cient 62

Brazil 23, 43, 85China 62South Africa 62

Global South 95Gluckman Commission 49Godsell, Bobby 76Gordhan, Pravin 75, 76Government of National Unity

(GNU) 56, 57Gramsci, Antonio 13, 68, 69Groom, Brian 62Gross Domestic Product (GDP)

Brazil 5, 20, 21, 22, 23, 24, 26, 28, 29, 30, 35, 41, 42, 62, 83, 86, 88, 89, 90, 91, 92, 95

South Africa 56, 57, 58, 83Growth Acceleration Programme

5, 88, 89. See"Programa de Aceleração do Crescimento (PAC)

Growth, Employment and Redistri-bution (Gear) 58, 82, 83, 99, 100. See also"neoliberal-ism

HHabib, Adam 13, 67, 79Hani, Chris ii, 8, 54Herstigde Nationale Party 51heterodox economics 10, 29, 84,

86, 87, 96Hirsch, Alan 57Hosie, Leandro 85, 94

IIliada, Iola 82India 4, 62, 91Industrial Development Corporation

(IDC) 89, 96Institute for Applied Economic Re-

search (IPEA) 19, 83Institute of Public Opinion and

Statistics (Ibope) 18

International Labour Organization (ILO) 9, 41, 45, 94

International Monetary Fund (IMF) 19, 22, 56, 77

JJune Movement 11, 12, 31, 32, 66,

98. See also"Brazil 2013 street protests

Jung, Courtney 71

KKagarlitsky, Boris 69Kark, Sydney 49Keynesian economic principles 51,

52, 55, 56, 95Kilusang Mayo Uno (KMU) 2. See

also"May First Labour Move-ment

LLabour Party (UK) 50, 51Landless People’s Movement (MST)

32, 85, 98Lembede, Anton 51living wage 42, 48Lula 4

2010 presidential elections 11, 24da Silva, Luiz Inácio Lula 8#rst term 3, 4, 10, 62, 82, 83,

84, 89Lula administration 23

social debt 23Lulism 38Lulist hegemony 35president 9, 16, 34, 82second term 5, 10, 27, 30, 41,

62, 82, 84, 86, 88victory 17, 34

Lula Moment 3, 9, 11, 30, 62, 83, 84, 101

Luthuli, Albert 48, 52, 53, 59

MMalan, D.F. 51Mandela, Nelson 2, 3, 6, 55, 57,

66Mantashe, Gwede 72Manuel, Trevor 58Manufacturing Circle 100Marx, Karl 62, 82, 99

105

Matthews, Z.K. 48, 49May First Labour Movement 2.

See also"Kilusang Mayo Uno (KMU)

Mazibuko, Lindiwe 76Mbeki, Moeletsi 76Mbeki, &abo 57, 58, 72, 83, 84,

99Mhlaba, Raymond 54Michie, Jonathan 57Minha Casa, Minha Vida 26, 89Minimum wage 43, 44, 45, 46, 65,

93, 94, 98Brazil 20, 21, 23, 24, 26, 35, 36,

37, 42, 43, 44, 64, 82, 85, 90, 92, 93, 94, 95, 98

South Africa 44, 45, 65. See also"living wage

Mining. See"South Africa mines, mining and Brazil mining

Morais, Lecio 87Movimento Passe Livre (MPL) 31,

32MST. See"Landless People’s Move-

mentMy House, My Life. See"Minha

Casa, Minha Vida

NNaidoo, Jay 2, 6, 8, 58Naidoo Pagé, Kami 2, 6National Development Plan (NDP)

93, 96, 101National Economic Development

and Labour Council (Nedlac) 56, 101

National Economic Forum 56National Health Insurance (NHI)

13, 54, 59national health service 13, 48, 49,

51, 53, 54, 59National Party (NP) 51, 52, 53,

56, 57neo developmentalism 10, 86neoliberalism 13, 17, 25, 34, 40,

53, 72, 84, 86, 88, 89, 96, 99, 101

Netshitenzhe, Joel 11, 61New Partnership for Africa’s Devel-

opment (Nepad) 77Nigerian Labour Congress 2Nzimande, Blade 69

OOrganisation for Economic Co-

operation and Development (OECD) 17, 89, 91

PPadayachee, Vishnu 57Pan Africanist Congress (PAC) 52Partido da Social Democracia Bra-

sileira (PSDB) 32Partido do Movimento Democrático

Brasileiro (PMDB) 32Partido dos Trabalhadores (PT) 2,

8, 10, 22, 26, 31, 34, 40. See also"Workers’ Party

main opposition. See"Partido da Social Democracia Brasileira (PSDB)

PT leadership 18, 19, 32Party for Socialism and Liberty

(PSOL) 17Pires, Roberto 10, 44Pochmann, Marcio 24Política de Desenvolvimento Produ-

tiva (PDP) 20Porto Alegre 16, 97post-Fordist 34, 36, 37Programa de Aceleração do Cresci-

mento (PAC) 5, 19, 20, 37, 89. Also"Growth Acceleration Programme

RRamaphosa, Cyril 76Reconstruction and Development

Programme (RDP) 3, 13, 48, 54, 55, 57, 58, 83

base document 54, 55, 57, 58Rio de Janeiro 30, 31, 32, 37, 41,

63, 92Rodriguez, Sixto 62, 63Roosevelt, Franklin D. 49Rousse$, Dilma 12, 16, 19, 23, 24,

26, 27, 28, 29, 30, 31, 65, 66, 82, 83, 87, 88, 98

Dilma administration 24, 29, 32second term 29

SSaad-Filho, Alfredo 84, 87, 96, 101São Paulo 16, 31, 32

call centres 11, 36Saul, John 14, 69School of Oriental and African Stud-

ies (SOAS) 101Schutte, Giorgio Romano 10, 15,

27, 30, 41, 82, 83, 91Seidman, Gay 10, 14, 39, 46, 82,

93Shapiro, Ian 71Sharpeville 52Singer, André 35Slabbert Commission 70, 71Smuts, Jan 50social compact 13, 34, 48, 65, 75,

76, 77. See also"social pactsocial democracy 12, 13, 47, 48,

50, 51, 53, 55, 57, 59, 74, 75, 78, 79

social democratic welfare state 51, 55, 59

Social housingBrazil 19, 24, 26. See also"Minha

Casa, Minha VidaSouth Africa

Constitution 6, 68, 70, 74, 75economy 45, 53, 54, 56, 57, 58,

65, 75, 77, 78, 97, 99, 100, 101

education 4, 8, 48, 49, 50, 51, 52, 53, 54, 56, 58, 59, 64, 65, 72

#nancial sector 83, 96, 97labour brokering 76, 77, 94Labour Relations Act of 1995 76manufacturing 100, 101mines, mining 12, 13, 51, 53,

56, 76public sector 9, 54, 75, 83

South African Communist Party (SACP) 2, 8, 57, 69, 71, 72

Southern African Development Community (SADC) 96

South-South 2, 8, 17Spicer, Michael 76state-owned enterprises (SOEs) 88,

89, 94, 96, 97, 100Stedile, Joao Pedro 85Suppression of Communism Act of

1950 51



106

TTobin, Stephen 9Trade unions 2, 3, 4. See also"Co-

satu and CUTBrazil 4, 5, 23, 34, 35, 37, 97,

98international union movement

2, 3South Africa 51, 56, 59, 94, 101

TransportBrazil 11, 19, 31, 37, 38, 42, 66,

85, 89, 91, 98Tripartite Alliance 2, 69, 71, 72,

73, 79. See also"Cosatu, ANC and SACP

UUnemployment

Brazil 8, 17, 21, 29, 40, 42, 43, 45, 85, 90, 91, 92, 94

South Africa 45, 57, 58, 62, 65, 71, 74, 75, 76, 83, 91, 100

União Nacional dos Estudantes (UNE) 32

United Nations Conference on Trade and Development’s (UNC-TAD) 29

United Nations Economic Com-mission for Latin America (CEPAL) 34

Universidade Federal do ABC (UFABC) 10

University of São Paulo (USP) 11

VVan Niekerk, Robert 12, 47, 59Vargas, Getulio 25Vavi, Zwelinzima 9, 69, 72, 76, 102Verwoerd, H.F. 52Vila Euclides Stadium 4, 7virtual senate 16virtuous cycle 10, 21, 41, 45, 95

WWashington Consensus 10, 21Webster, Edward 14, 56White Paper for Reconstruction and

Development 57Wiehahn recommendations 56Workers’ Party 3, 5, 8, 10, 11,

12, 16, 18, 41, 42, 43, 82,

84, 85, 86, 96, 97, 99, 101. See also"Partido dos Trabal-hadores (PT)

World Bank 22, 24, 41, 57, 77World Trade Organization 17

XXuma, A.B. 48, 49, 51

ZZero Hunger programme 4Zille, Helen 76Zuma, Jacob 9, 69, 72, 75, 78

Brazil’s combination of rapid economic growth and steady reduction in extreme poverty over the last decade persuaded Cosatu that a strategy of incomeled growth is possible in South Africa. Inspired by Luiz Inácio Lula da Silva, president of Brazil 2003–2010, Cosatu is openly campaigning for what they call a Lula Moment in South Africa.

How did Lula manage to reduce inequality in a country that has long been one of the world’s most unequal societies? How was Brazil able to increase formal employment during one of capitalism’s worst economic crises? How did Brazil win the support of labour in their neo developmentalist approach?

This collection of essays by leading experts on Brazil and South Africa explains how the Lula Moment came about, its contradictions, its limits and its possibilities. It concludes surprisingly that the socioeconomic transformation that Lula brought about in Brazil lies at the core of the African National Congress’s historic mission in South Africa. The collection argues that space exists for South Africa’s own Lula Moment. But the window is rapidly closing.

This is a truly excellent and timely collection of essays that are of relevance not only to South Africa and Brazil but to the entire Global South. ... no other large economy in the developing world has witnessed as concerted and steadfast an effort as we see in Lula’s Brazil in investing in the wellbeing of the poor and working masses while pragmatically pursuing macroeconomic growth and stability. Rudra Sil, University of Pennsylvania, and author of The Politics of Labor in a Global Age.

What can South Africa learn from Lula's Brazil?

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