Crisis, public debt and financialization of the Brazilian economy

Departing from the global context of substitution of liberal Keynesian ideology by the monetarist neoliberal one, the text tackles crisis phenomena and capitalist reconstruction which contributed to the financialization of the Brazilian economy. Our hypothesis is that such a process occurred in a context of socioeconomic reorganization, in which the state’s role was fundamental, despite the neoliberal discourse sidelined by the intention to restore the level of wealth to classes whose incomes were reduced by welfare policies. In Brazil the neoliberal ideology and its monetarist logic started to become consolidated in the middle of the 1990s, with the Real Plan as its main landmark. Besides inflation control, that plan aimed to ensure Brazil as destination of financial global capital which was suffering from few investment possibilities. To do so, besides measures aiming for status as market economy, Brazil started to attract short-term capital through inflating interest rates to among the highest in the world. Reproducing the historical connection between capitalism and state, financial expansion of the Brazilian economy also occurred under this association in which public debt was the great engine of the process. If on one hand Brazilian public debt is not too high amongst the main world economies, on the other hand, interest expenditure is the country’s second greatest expense, beaten only by public pension expenses. It is in this point—besides the crises that tend to be catastrophic for the poorest—that fictitious economy reveals its concrete face. If public debt is not concrete in a strict economic meaning—production of value—it is concrete in its capacity to impose material restrictions to large social segments. Finally, another effect of the substitution of ideologies was moving the old polarization ‘capitalism versus socialism’ into another polarization within the former. Hence, neoliberalism was actually a conservative revolution inside capitalism.