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Heterodox Shock in Brazil: Técnicos, Politicians, and Democracy

Published online by Cambridge University Press:  05 February 2009

Lourdes Sola
Lourdes Sola
Affiliation:
Professor of Political Science at the University of São Paolo.
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Extract

The recent experiences of transition to democracy in Latin America have taken place in circumstances which suggest a need to rethink the political and social dimensions of inflation. The experience of the 1980s reveals that the once familiar road which led from an inflationary spiral and a rising foreign debt to the collapse of democracy can also be travelled by other types of regime. The crisis of the bureaucratic-authoritarian regimes, Chile apart, reflected an inability to deal with those same focal points of political and economic uncertainty. The sequence which runs from high (or hyper) inflation to political regime change may be neutral, in the sense that it is indifferent to whether the regimes affected are democratic or authoritarian.

Type
Articles
Information
Journal of Latin American Studies , Volume 23 , Issue 1 , February 1991 , pp. 163 - 195
Copyright
Copyright © Cambridge University Press 1991

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References

1 Burns, T., Baumgarten, T. R. and Deville, , ‘Inflation, Politics and Social Change: Actor Oriented Systems Analysis’, The Shaping of Socio-economic Systems (Gordon and Breach, 1986), pp. 81–2.Google Scholar

2 I have in mind the proposition graphically represented by the Phillips curve, which has passed into conventional wisdom. Once inflation has reached a particular threshold, high doses of recession, unemployment and voluntary or imposed social discipline are necessary in order to achieve a relatively small percentage change in the rate of inflation.

3 See Hirschman, A., ‘The Turn to Authoritarianism in Latin America and the Search for its Economic Determinants’, in Collier, D. (ed.), The New Authoritarianism in Latin America (Princeton, 1979)Google Scholar, and Sola, L., ‘The Political and Ideological Constraints to Economic Management in Brazil, 1945–1964’, unpubl. DPhil diss., University of Oxford, 1982Google Scholar, and Gestão da Economia e Mudança de Regime Político (São Paulo, 1985).Google Scholar

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7 Ibid., p. xviii.

8 Stepan, A., Rethinking Military Politics: Brazil and the Southern Cone (Princeton, 1988), p. 45.Google Scholar

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10 Consider the many diagnoses of the crisis, and the proposals relating to economic management which proliferated in various academic institutions, the most significant of which were the Faculties of Economics of the University of Campinas (UNICAMP) and of Rio de Janeiro (FEIA-RJ), the Catholic University of Rio de Janeiro (PUC-Rio), and the Getúlio Vargas Foundation of São Paulo (FGV-SP). The ‘inertialist’ hypothesis was developed by economists at PUC-Rio who became the architects of the Cruzado Plan. Similar approaches had previously been advocated by Adroaldo Moura e Silva at the University of São Paulo and, in a more polished version, by Bresser Pereira and Nakano at FGV-SP.

11 See Sallum, B. Jr, ‘Porque não deu certo: notas sobre a transição política brasileira’, in Sola, L. (ed.), O Estado da Transição: Política e Economia na Nova República (São Paulo, 1988).Google Scholar

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13 See Meyer, M. and Montes, M., Redescobrindo o Brasil: A Festa na Política (São Paulo, 1986).Google Scholar

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18 Castro and Pires de Souza, A Economia Brasileira.

19 The major arguments for seeing it as a blessing in disguise are found in Castro and Pires de Souza, A Economia Brasileira; Sola, Gestão da Economia, Carneiro, ‘Long-Run Adjustment’; and Hirschman, ‘The Political Economy of Latin American Development’. It is seen as a ‘curse in disguise’ by B. Lamounier and A. Moura, ‘A Política Econômica e Abertura no Brasil, 1973–83’, Textos IDESP, No. 4, 1984.

20 The term is from Hirschman, ‘The Turn to Authoritarianism’.

21 For a balance sheet for the year, see Sallum, B. Jr, Martins, C. and Graeff, E., ‘A Conjuntura Política e Econômica em 1985’, Ibades, vol. 4, no. 1 (1986).Google Scholar

22 See Bier, et al. , O Heterodoxo e o Pos-Moderno, pp. 10–50.Google Scholar

23 For accounts of the decision-making process, see Sardemberg, C., Nos Bastidores do Cruzado: Aventura e Agonia (São Paulo, 1987)Google Scholar, and Solnik, A., Porque não Deu Certo (São Paulo, 1987).Google Scholar

24 See Lindbeck, A., ‘Stabilization Policies in Open Economies with Endogenous Politicians’, American Economic Review, vol. 66 (1976)Google Scholar for the first mode, and Hirschman, ‘The Turn to Authoritarianism’ for the second.

25 See Hirschman, A., ‘The Political and Social Matrix of Inflation: Elaborations on Latin American Experience’, in Essays on Trespassing: From Economics, Politics and Beyond (Cambridge, 1981)Google Scholar, and ‘The Political Economy of Latin American Development’; Arida, P. and Resende, A., ‘Recessão e Juros’, Revista Brasileira de Economia Política, vol. 5, no. 1 (01–03 1985)Google Scholar; Arida, P., ‘Economic Stabilization in Brazil’, Working Paper, No. 149, Washington, 1984Google Scholar, and Lopes, F., Choque Heterodoxo, Combate a Inflação e Reforma Monetaria, (Rio de Janeiro, 1986).Google Scholar

26 Arida, P. (ed.), Brazil, Argentina, Israel: Inflação Zero (Rio de Janeiro, 1986)Google Scholar; Belluzo, interviewed by author, 25 and 28 June 1987; J. Sayad, testimony and public conferences, at CEDEC, 22 June 1987, PMDB, 15 June 1987, and USP, 8 June 1987.

27 Sola, ‘Political and Ideological Constraints’.

28 The banks lost heavily from the de-indexation of government bonds in their portfolios.

29 Sardemberg, Nos Bastidores do Cruzado: Solnik, Porque Não Deu Certo.

30 The bulk of this information comes from the accounts by Sardemberg and Solnik cited above, supplemented by the author's interviews with Arida and Belluzzo, and public statements and lectures given by Arida and Sayad.

31 Dedecca, C., ‘Crescimento, Emprego e Renda’, São Paulo em Perspectiva, vol. 1, no. 2 (1987), pp. 83–97.Google Scholar

32 de Barros, J. R. Mendonca, ‘O Setor após a Reforma’, Informações FIPE (07 1986).Google Scholar

33 For a case study of the Weimar Republic, see Waldmann, P., La Inflación Alemana, 1987, p. 35.Google Scholar

34 For the industrial side, see Dedecca, , ‘Crescimento’, pp. 93–5.Google Scholar

35 See Burns et al., ‘Inflation’, and Hirschman, ‘The Political and Social Matrix’, in connection with public sector spending in developing countries.

36 Przeworski, A., ‘Capitalism, Democracy, Pacts’, paper presented to Seminar on Pacts in the Transition to Democracy, University of São Paulo, 10–1306 1987, p. 29.Google Scholar

37 Przeworski, ‘Capitalism’, and Whitehead, ‘Democratic Consolidation’.