At the World Social Forum, Brazil’s President calls neoliberalism a “failed recipe”

Activists gathered in Porto Alegre, Brazil last week for the annual meeting of the World Social Forum. The theme of this year’s meeting was the crisis of capitalism with special emphasis on the role that capitalism has played in degrading the environment and concentrating wealth in the hands of the few.

They called for a worldwide day of action on June 5 to support environmental and social justice and discussed alternatives to  neoliberalism, which has dominated the world’s economy for the last 20 years. Neoliberalism is a set of economic policies characterized by a preference for privatization, deregulation, reduced spending on government social programs, and government policies that allow capital to circulate without restraint.

Among those speaking was Brazil’s President Dilma Rousseff. Rousseff had been invited to the World Economic Forum, where the world’s rich gathered in Davos, Switzerland,to share ideas about how to improve neoliberalism. It was taking place at the same time as the World Social Forum.

She declined and instead addressed about 4,000 World Social Forum participants crammed into a Porto Alegre gymnasium. She told the crowd that neoliberalism was “a failed recipe” for economic development. It had been implemented in Brazil in the 1980s and 1990s but resulted in “stagnation, loss of democratic space and sovereignty, deepening poverty, unemployment, and social exclusion.”

Its troubles led to the election in 2003 of Lula da Silva of Brazil’s Workers party to the presidency. Da Silva didn’t reverse all the neoliberal policies or even most of them, but he did implement policies that redistributed some wealth, notably the Bolsa Familia, a cash subsidy paid directly to low-income Brazilians.

As a result of the Bolsa Familia and other policies directed at helping working people, Brazil’s poverty rate declined from 42 percent in 2003 to 28 percent in 2010.

“We are winning this battle, as shown by the 40 million Brazilians who left poverty and rose to the middle class,” said Rousseff, who succeeded da Silva in 2011. The key to this significant reduction, Rousseff said, has been the strategy of linking economic growth with a fairer distribution of the fruits of growth.

Other quality of life indicators have improved during this period. Brazil’s life expectancy at birth increased from 63 years in 2000 to 72.5 years in 2011. The unemployment rate fell from 12.3 percent in 2003 to 6.7 percent today.

Rousseff also criticized the austerity policies being implemented in Europe that reduce spending on social needs. “The dissonance between the voice of the markets (that demand austerity) and the voice of the streets appears to increase more and more in developed countries,” Rousseff said.

She also noted that progressive governments in Latin America have replaced neoliberal austerity measures with a “development model capable of linking growth and job creation, poverty eradication, and reducing inequalities.”

Unfortunately, Brazil like its South American neighbors has not been able to free itself completely of the constraints imposed by neoliberal economic policies.

Last year, Brazil’s economic growth averaged 3.7 percent in 2011, well below its 7.5 percent for 2011. The drop off was partially due to the economic slow down in Europe.

Moreover, Brazil remains a country of stark inequalities. The richest 10 percent of the country account for 42 percent of consumer spending while the poorest 10 percent account for slightly more than 1 percent. Twenty-five percent of the population still live on an average income of US$106 a month.

For the future, Rousseff will try a delicate balancing act between distributing wealth more fairly and reassuring investors that her country is a great place for them to see their capital grow.

For instance, the Brazilian government will increase its investment in its My House, My Life program, which seeks to make affordable, decent housing available to Brazilians of modest means. It plans to build 600,000 new homes in 2012 up from 457,000 in 2011.

At the same time the government has made it clear to foreign investors that their capital will be safe in Brazil. Recently Fitch, a rating service company, reported that Brazil’s partially privatized electrical system remains a solid investment opportunity because country’s “regulatory structure (is) both stable and mature, reducing the electric companies’ exposure to regulatory risks.”

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