The omnipotence of the Brazilian state

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?