Brazil: At the Tipping Point?

This week’s New Yorker has an interesting article entitled “Corruption and Revolt” by Patrick Radden Keefe. It discusses a journalist’s investigative and sociological work in Afghanistan. The conclusion is that members of the government siphoned much of the hundreds of billions of dollars spent in Afghanistan off in corruption schemes.

There are parallels that apply to Brazil. While Brazil no longer receives significant aid from the US, Brazil loses significant wealth to corruption every year. The UN estimates that graft and theft add an average 10 percent surcharge to doing business worldwide. Africa lost a quarter of total economic production to corruption during the 1990s. I am not aware of reliable estimates of the impact in Brazil. But it is probably between 10 and 30 percent of the GNP, especially if we take into account activities in the informal sector.

Keefe cited a formula by Robert Klitgaard of Clairemont College:
Corruption = Monopoly Power + Discretion – Accountability.

Brazil has a long-standing competitive and somewhat democratic system with competing elites. One would think that given competition, there is no monopoly power. But, one can also argue that Brazil’s traditional elites had been able to maintain a reduced elite circulation at least up until the military coup in 1964 when threatened by emerging urban and rural movements as expressed in the unions and “camponeses”. The military coup in 1964 thus guaranteed monopoly power for the accommodating traditional elite. Military government, authoritarian control and censorship all contributed to discretion during the 21 years between 1964 and 1985 when civilian government was restored. Before the coup and throughout the military governments, intervention in civil society and control of the press all inhibited accountability. Corruption thrived as a result.

Brazil’s patrimonial tradition, its colonization by the Portuguese, the weighty bureaucracy, the massive demographics of slavery and the rigidity of the class system, created a system predisposed to accommodations.

The Brazilian “jeitinho” is the most famous form of getting along and making things work. The jeitinho might be considered at best an informal work-around based on personal relationships to get things done. At worst, it could be a gateway to more nefarious and destructive habits. As long as it was limited, the jeito might be justifiable graft or lubricant to overcome bureaucratic rigidity.

But the sums involved in Brazil’s recent scandals – the Mensalao and the Petrolao –go way beyond the jeitinho. Has Brazil reached a tipping point?

Gandhi once said that “Humanity is like the ocean; if a few drops are dirty, the whole ocean does not become dirty.” Some would say that Brazil is as polluted as the plastic gyres that threaten our oceans today.

Felipe Miranda, an economic consultant, argues in a book published last year: “O Fim do Brasil” (The End of Brazil) that Brazil’s misguided populist politics have put it on a secular slide a la Argentina.

I am not so pessimistic. In spite of facing a bleak immediate future in the macroeconomic environment, Brazil’s size, resources and resilient population can make a strong come back. The PT governments have made a substantial contribution in rectifying some of Brazil’s inequality. The movement from absolute to relative poverty has unleashed a potent new lower middle class, which is just beginning to find its way.

Dilma is right in trying to promote her new theme – Patria Educadora – even if her efforts are misguided and may in the end be futile. The middle class, both the old and the new, want education and equal opportunity. It remains to be seen if those who need it can take responsibility and make it their demand and their reality.

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