The omnipotence of the Brazilian state

If statism is defined as an ideology which provides a preferential role for the state in society, placing the state as the main agent of social action and transformation, this sort of statism is very pervasive in Brazilian society. It unites people from all social classes and ideological inclinations.

Brazilians seem to expect just about everything from the State. From jobs, stable prices, credit, subsidies for carnival masquerades, there is hardly anything for which the government is not expected to provide. It is not that the ruling elite in Brazil comprises only bureaucrats but rather that the state bureaucracy is the base to which all other groups adhere either through alliance or dependence. Since the state is the ultimate provider of resources, “the citizenry expects to live at government expense and under full protection”.

Consequently, statism has been supported in Brazil by old-fashioned socialists, neo-mercantilist businessmen, conservatives who oppose social change, the military, privileged bureaucrats, intellectuals who seek after state subvention, and all sorts of “compassionate” individuals who think the state is the only entity with power to reduce social inequalities.

To understand the intrinsic correlation between statism and Brazilian-style corruption, for instance, one needs to consider the reality of a state that has historically been above society. Statism in Brazil is a by-product of an old “spoils-system” inherited from Portugal, a country where the monarch granted to his staff, and preferred subjects, all sorts of graces and favours at the expense of the law.

Statism also finds its early roots in Portugal's disdain for individual freedom and initiative. In Portugal's Catholic medieval hierarchy, the class of entrepreneurs (traders) was ranked lowest on the social scale. In that country, "as in Communist China and Marxist Russia", C.R. Boxer commented, "the merchant was regarded as a parasitic and profiteering middle-man, resolved to enrich himself at the expanse of his fellow-men".

During colonial times, the Portuguese Crown possessed an enormous variety of commercial monopolies, ranging from the importation of sugar to the control of the soap industry. Regional and district monopolies were granted to favoured individuals and courtiers. Even the manufacture and sale of soap was, for centuries, monopolised by the Crown. In 1660, for instance, the white soap monopoly of Lisbon was granted to a Carmelite nun, the Countess of Calheta, on condition she gave a share of the profits to two distinguished general officers, Dom Luís de Menezes and Gil Vaz Lobo. According to Boxer:

It would take too long to enumerate … all the overseas sources of wealth which were exploited by the Crown at one time or another, whether in the form of a (theoretically) rigorous monopoly, or a percentage of the profits, or in the way of Customs duties and export and import dues … Even such trivia as river ferry-crossings and the dues from washermen, limeburners and fishermen were often rented out by the Crown or by its representatives. Perhaps more than any other country, it was a long-established practice in Portugal for the Crown (and its successor republic) to farm out the smallest public offices which might be expected to produce any revenue; and the same procedure was followed in Portuguese India, Ceylon, Africa and Brazil.

Another factor that contributed to the growth of statism was slavery, which lasted longer in Brazil than in any other nation in the Western world, only being abolished in 1888. In his 1879 visit to the country, US historian Herbert H. Smith associated slavery with a “culture of indolence, pride, and selfishness” that, in his opinion, made many Brazilians aspire to live “as parasites on others or on the government”. In brief, slavery left as its heritage a mass trained to be dependent on the government and others. According to the late historian José Honório Rodrigues:

It was not recognised that ... poverty could be overcome by work and saving. Work was scorned; it was reserved exclusively for slaves. No attention was paid to saving, with the result that the capital required for possession and enjoyment of the riches so greatly vaunted in speeches was never accumulated.

Centuries of slavery had indeed the effect of debasing the value of labour and perverting the sense of individual liberty and responsibility. It left “deep prejudices against active life … and disinclination to serious endeavour in the areas of commerce and industry”, thus generating a society with marked contempt for any work other than that of a public position.

The State became, in the words of the great abolitionist (anti-slavery) leader Joaquim Nabuco, “the refuge of the descendents of the rich and noble families who squandered the fortunes acquired through slavery”. Nabuco established the intrinsic connection between slavery and statism as follows:

Among the classes which slavery artificially generates, the largest is that of the public employees. The close relationship between slavery and the epidemic of bureaucratism is not more open to doubt than the relationship between it and the superstition of the All-Providing State. Under that system, the government is counted on for everything.

Being the only active organisation, the state covets and absorbs all disposable capital by means of taxation and loans, distributing among its clients by means of public employment, absorbing the savings of the poor through inflation and rendering precarious the fortunes of the well-to-do. Any twenty or thirty Brazilians to be met wherever our most cultivated society gathers can provide the example. All of them either once were, or now are, or will one day be public employees; and if not they themselves, then their sons.

Complaints over excessive statism were commonplace throughout the country’s period of constitutional monarchy (1822-89). In 1870, prominent politician A.C. Tavares Bastos argued that there existed in Brazil a “fear of companies”, which he directly associated with an “anachronistic tradition of despotism that denies the modern spirit of liberty”.

In fact, as early as 1853 entrepreneurs like the Viscount of Mauá complained that “everything is expected from the government and that individual initiative does not exist”. He argued that any economic activity depended on “official sensibilities” continuing to exist, and that people were much inclined to consider the state as the “tutor” (paternal protector) of society. As a result, the most successful businesspeople were merely “clients” of the landed gentry who controlled the state machinery and expected to receive “unbearable tutelage of the government”. They saw this as an easier means of acquiring wealth than through work and production.

Unfortunately, the reality of statism hasn’t changed over the years. Brazil’s most successful business people are still neo-mercantilists who practice all sorts of cartel capitalism with the state. Under the pretext of defending “national interest”, they request privileges such as preferential interest rates and special loans from state banks and other governmental agencies, which they often do not have to repay. As a result, law professor William Prillaman explains, “aspiring entrepreneurs are unable to seek relief, because economic decision-making is based on political concerns rather than rational dictates of the rule of law”.

This kind of cartel capitalism is developed when the government exercises its power for the enrichment of private interests. It involves, in countries like Brazil, a form of embezzlement of national wealth disguised as protection of the so-called “national interest”.

The deleterious effects of statism in Brazil were aggravated in the 1960s with the ascension to power of nationalistic military officers. At the end of their long, authoritarian regime in March 1985, these army rulers left behind more than 600 state-owned companies. By 1983, state companies accounted for three-quarters of the assets and half of the sales, profits, and employment of the 200 largest corporations. In 1985, government expenditure represented 37.6 per cent of GDP, by far the highest of all countries in Latin America.

The bureaucratic sector charged with managing this huge and notoriously inefficient, state machinery resembled in many respects the notorious nomenklatura of the former communist regimes in Eastern Europe. Some of these state employees worked only nine months a year and yet received a salary that was the equivalent of 16 working months. In an attempt to finance the numerous privileges of these bureaucrats, Brazil has become one of most heavily taxed nations in the world. Unfortunately, many of these privileges have not been abolished. For example, in today’s Brazil, John Fitzpatrick says:

While the government’s subsidies amount to almost R$25,000 (US$8,000) a year for former state employees, the subsidy for “normal” pensioners who get the ordinary state pension is less than R$1,000 (US$320). Pensions take up so much of government spending that the state has little left for other social benefits. Since there are not enough contributors to fund this long-term generosity, the government makes subsidies amounting to more than 5 per cent of GDP to keep the system solvent. Since the government does not have this money it has to borrow and pay sky-high interest rates to do so.

The state bureaucracy, however, has over the present “democratic” period managed to retain its traditional power and prestige in society. They have convinced many Brazilians that the archaic model of national-statism is still a valid option in terms of socio-economic development. They have been able to do this even though a May 2001 document of Transparency International reveals that a sound process of privatisation would “significantly reduce the amount of resources and positions subjected to political bargain”.

Regardless of its would-be federal organisation, the collective fancy in Brazil is still dominated by the omnipotence of the state as the ultimate provider and protector of the citizen. Hence, despite the military period eventually coming to an end (1964-85), statist traditions have survived in a society invariably “colonised” by the bureaucratisation of social life. Arguably, societies with extensive public property holdings, as is the case in Brazil, are vulnerable not only to problems of corruption but also to political arbitrariness.

As Boston University law professor Randy E. Barnett asserts in more generic terms, whenever public authorities “enjoy a vast range of privileges denied their ordinary citizens, and are subject to few of the economic constraints of private institutions, their citizens are forever vulnerable to governmental tyranny”.

In reality, it is evident that all attempts to find a solution to the country’s complex socio-economic problems by increasing government interference have provoked a clear reduction of public accountability. It is a fact that many abuses of power that have occurred throughout Brazil’s history were masqueraded as guaranteeing top-to-bottom rights to the population. For instance, history professor José Murilo de Carvalho comments:

A characteristic of the military government was its concern with welfare policies. Copying the first [populist dictatorship] of the thirties, the military tried to compensate for the removal of civil and political rights by promoting social rights. Social legislation was extended to the rural population, to domestic workers and to the self-employed. Repression for the opposition, paternalism for the poor, support for and alliance with the business community. To use Barrington Moore’s expression, the military tried to modernise the country from above … by means of political authoritarianism.

Consequently, there has been a considerable increase over the years of a bureaucracy ineffectively conducting Brazil’s public affairs, wasting its own resources, and watching out for private and corporate interests. The latter reap immense, often illegal, benefits from a notoriously corrupt and inefficient government. This has resulted in abnormally ineffective government action in areas such as public security, healthcare, and education, which are areas where the government’s constitutional obligation is to exercise its power much more effectively. Currently, the situation in Brazil benefits only a minority of privileged individuals at the expense of society as a whole. The problem of statism needs therefore to be seriously considered, and remedial action needs to be taken. Who is going to lead the charge?