Brazilian populism: good for politicians, bad for the poor

The fact that President Lula remains so popular in the midst of so many scandals involving hundreds of millions of US dollars should come as no surprise to those familiar with the political workings of Brazil. For instance, the Government has spent millions of dollars on political propaganda. While such propaganda does nothing to reduce social problems, it serves to boost the President's charismatic image as "a former factory worker with no university degree who speaks to his people as one of them".

Support to the government is also obtained from the fact that the federal administration has employed within the state machinery thousands of members and supporters of the ruling PT party. A large number of party cadres, including trade union leaders, have been appointed to high positions in the government. This is so common place that a retired Supreme Court chief justice, Maurício Corrêa, has denounced that even the most highly technical jobs are going to unqualified party members, who nonetheless pay the party a levy constituting up to 20 per cent of their salaries.

Another example of populism taking place involves the distribution of money to families in the form of a supposed anti-poverty program called Bolsa Família (family fund). This program is controlled by the federal government and provides direct cash to millions of Brazilians, roughly a fifth of the country's population.

Such "generosity" offers no real solution for the problem of poverty, although it encourages the poor to regard President Lula as a "generous" paternal leader and provider. Unfortunately, demagogic governmental programs such as the Bolsa Família end up aggravating the excess in government bureaucracy and spending, which is actually one of the reasons that public debt, taxes and interest rates are so high in Brazil, with its government claiming an estimated 40 per cent of GDP in the form of taxes and contributions.

In Brazil, taxation to subsidise government expanding is overwhelming and the amount of red tape confronted at all levels of government is simply enormous. According to the 2008 Index of Economic Freedom, "starting a business in Brazil takes more than three times the world average of 43 days, and obtaining a business license takes more than the global average of 234 days".

Finally, "inflexible employment regulations", which is another problem that populism certainly aggravates, is found to have created "a risk aversion for companies that would otherwise hire more people and grow".