In the 1990s, the Brazilian government joined the winning side of an ideological struggle that had been developing for decades. Brazil’s government aligned with mainstream economic thinking and the interests of finance capital in the ideological struggle that Adam Przeworski summarized as follows: from the mid 1930s to mid 1970s, the dominant economic belief was that increases in consumer income stimulate growth; and since then, the dominant belief is that growth is driven by increasing saver’s income.

The financial expansion of the Brazilian economy began in this global context of substitution of neoliberal for developmentalist ideology. This expansion in Brazil came in the mid 1990s, a bit later than the rise of finance at the center of world economy. The process involved a reorganization of economic relations, in which the role of the Brazilian state was fundamental, despite neoliberal discourse. Efforts to restore the profits of classes and class fractions whose incomes were reduced by welfare policies were subjacent to this discourse.

Neoliberal ideology began to be consolidated in Brazil by the economic program known as the Real Plan, launched in 1994. In addition to inflation control, the plan sought to attract over-accumulated capital that was circulating globally in search of profitable outlets. Reproducing the historical connection between capitalism and the state, the financial expansion of the Brazilian economy intensified under this association, fueled largely by public debt.

As we know, neoliberals do not like public education or public healthcare, but they do like public debt. This is clearly visible in several important fiscal and monetary policies implemented in Brazil after the Real Plan. They significantly influenced class relations and revealed not only the class character of the state, but its financial class character. These policies included the delinking of tax revenues from hitherto constitutionally mandated spending on social welfare policies, the ideology of so-called fiscal responsibility, and goals for primary fiscal surpluses.

It is remarkable that the first time the Brazilian government ran a primary fiscal deficit since 1998 was in 2014, which was repeated in 2015, on the eve of the parliamentary coup that removed the Rousseff government. Given that a primary deficit means that total non-financial expenditures—i.e., not including interest on public debt—have exceeded total non-financial revenues, it also means less room in the budget to pay interest on public debt (The conspirators who seized power in 2016 promised to resume the pursuit of primary surpluses and so did the current government’s Chicago-inspired economic policymakers).

In the realm of monetary policy, the state’s priority was inflation control, which has been pursued through inflation targeting since 1999. Finance thus benefitted from interest rates that were high enough to both attract capital and control inflation. For instance, during the 1999–2015 period—i.e., under the Cardoso, Lula and Rousseff administrations—the ex-post real interbank interest rate averaged 7.3% in Brazil, while the average for the same period was 0.9% in Korea, 2.7% in Mexico, and 2.5% in South Africa.

Fiscal and monetary policies favored the financial fraction of capital and established a state and institutional apparatus through which finance extorted income from labor. Together, public debt and taxation form a fiscal complex that, in addition to redistributing surpluses, deepens labor exploitation. The growth in public debt and the interest on that debt has led to increased taxation, whose burden was ultimately levied on workers. This, combined with a decrease in state spending on welfare policies—i.e., on the social wage—has fueled a potentially higher aggregate rate of labor exploitation, revealing the exploitative character of the fiscal superstructure.

All these measures were made possible by a state apparatus whose ideas and practices left it even more distant from a substantive concept of democracy. This democracy would be characterized by popular participation—direct or through representatives—in decisions that unevenly affect the material well-being of the entire population. But considering public debt as a special class relation between debtors and creditors, it can be seen how handling of this debt significantly constrained democracy, as revealed by material inequality that in turn reproduced political inequality.

In the years following the launching of the Real Plan, pro-finance policies combined with the selective bureaucratic insulation of economic policymakers, and with the legislature’s failure to address the macroeconomic agenda. The latter was thus left to control by the executive branch, which was strongly influenced by finance capital and restricted popular participation in decisions about fiscal and monetary policies.

The entire picture is of course more complex than summarized in these few words. The politics of economic policy in general and of public debt in particular are extensively explored in my book The Politics of Public Debt: Financialization, Class, and Democracy in Neoliberal Brazil, which has just been released by Brill publishing house in its Studies in Critical Social Sciences series. The research focused on the period that includes the two governments of President Fernando Henrique Cardoso (1995–2002) and the two governments of President Luiz Inácio Lula da Silva (2003–2010). Nevertheless, all of the available statistical series are presented until 2015, President Dilma Rousseff’s last full year in office. I also analyzed some of the most significant macroeconomic policy events during her administration, which began in 2011.

When I was concluding the first version of the book, in mid-2016 a parliamentary coup d’état overthrew President Rousseff’s second government. This forced me to question how I should approach this event, considering I had not analyzed the Rousseff governments as deeply as I had those of Cardoso and Lula. A prudent option, and perhaps recommendable for historical sociology, would be to “ignore” the coup. Another option, which was possible but riskier under the conditions—considering that the coup had just taken place and the context was still chaotic—would be to present a hypothesis based on the study that I had undertaken.

The Rousseff government was deposed because it was no longer able to mediate the struggle between labor and capital in such a way as to guarantee capital the advantages it considers satisfactory. This hypothesis was examined in the book’s afterword. The analysis of the Brazilian economy since the mid 1990s helps understand how the country reached the situation of 2016, when a coup d’état took place whose objectives are still being pursued through increasingly antidemocratic methods.

This book’s theoretical foundations were developed in 2008, during the time I spent as a visiting scholar at the University of Wisconsin-Madison, where I had the privilege to work with the late Erik Olin Wright. I am indebted to him for much of the inspiration and work that led to this book. I certainly was not able to communicate the analytical precision with which Erik responded to the ideas I presented him. Yet his conviction that theoretical precision must be our constant pursuit shall last forever.

Daniel Bin is an associate professor at the University of Brasilia. He was a visiting scholar at Yale University and at the University of Wisconsin-Madison. Bin has published on economic policies and their implications for labor and class relations, and more recently on dispossessions of means of subsistence and production.

Image: Daniel Bin