Tropic of Chaos

by Christian Parenti

  Domestic industry and markets were heavily protected. For example, in 1960 Brazil’s tariffs on manufactured imports were almost ten times as high as those charged by the European Economic Community (EEC)—a 165 percent markup in Brazil versus 17 percent in the EEC.18 Both infant and well-established industries were heavily guarded against foreign competition. Under this regime, industry grew robustly but unevenly. Some sectors were dynamic, efficient, and innovative, “a group of leading firms gained a competitive edge in the manufacturing sector,” while others languished due to the artificial monopolies allowed by ISI. Overall—and contrary to the assertions of today’s economic orthodoxy—labor productivity, living standards, and the economy as a whole increased under ISI.19

  David Harvey described the age of state-led development as follows: “This system had delivered high rates of growth in the advanced capitalist countries and generated some spillover benefits (most obviously to Japan but also unevenly across South America and to some other countries of South East Asia) during the ‘golden age’ of capitalism in the 1950s and early 1960s.”20 In the early 1970s, the model in its various iterations hit trouble—partly due to internal problems and partly due to a worldwide crisis of overproduction and overaccumulation.21

  The so-called golden age of capitalism, roughly 1945 to 1973, was essentially the story of postwar reconstruction: the long boom was the big rebuild following the devastation of World War II. The war destroyed not only 59 million human lives but also vast amounts of existing capital: factories, cities, farms, docks, gas works, water mains, roads, rails, and communications systems. For six years the scientific genius and herculean industrial might of the major economies was fed wholesale in the maw of war. The overall costs are variously estimated as at $1.5 or $2 trillion, but we’ll never know the real total.

  The post-1945 economic boom was essentially the big rebuild or big recovery. The war’s end meant there was pent up demand and plenty of investment, and industrial planning enjoyed broad legitimacy. During the big rebuild, wages, taxes, and profits all grew together. However, during the mid-1960s there started to be too much stuff and not enough demand.22 By 1970, 99 percent of American homes had refrigerators, electric irons, and radios. More than 90 percent had washing machines, vacuum cleaners, and toasters.

  As one economist put it, “Saturation in one market led to saturation in others as producers looked abroad when the possibilities for domestic expansion were exhausted. The results were simultaneous export drives by companies in all advanced countries, with similar, technologically sophisticated products going into one another’s markets. . . . Increasing exports . . . from developing countries such as Taiwan, Korea, Mexico and Brazil further increased the congestion of mass markets in the advanced economies.”23

  By the early 1970s, capitalism was suffocating from industrial success. Around the world and across industries, firms found it increasingly difficult to maintain their amazing (if not aberrant) postwar profitability.24

  Continent of Debt

  By the early 1970s, a new factor had entered the equation: there was a global glut of liquidity—too much capital was competing for too few investment outlets. That translated into very inexpensive and abundant credit. Brazil had always borrowed to fund its industrialization, but now growth slowed, and capital became cheap.

  In 1973, the other shoe dropped: Arab defeat in the Yom Kippur War led to an oil embargo by many key exporters. The price of oil quadrupled in less than a year. That hit Brazil hard. Though now a major oil producer, it then imported 80 percent of its petroleum. Before prices could subside, the Shah of Iran fell to a revolution, precipitating a second oil shock in 1979. Prices nearly doubled again. By the early 1980s, the Brazilian government was desperately trying to stimulate its economy by borrowing and spending. The Miami Herald business section pointed out the unfairness of the macroeconomic situation: “In contrast to Argentina and Mexico, a very high proportion of the billions borrowed here went to productive projects, analysts say. Many were the projects of ‘Brasil Grande’—nuclear power plants, hydroelectric dams, jungle highways, petrochemical complexes, an export-oriented arms industry, steel mills, and a $3-billion railroad to facilitate steel exports.”25 But Brazil was subject to the same austerity as those who had borrowed less productively.

  Then, a third layer of the crisis hit. The world’s leading economy, the United States, also faced deep trouble. Overcapacity globally meant a collapse in the rate of return on investment—a collapse of profits. “From a peak of nearly 10 percent in 1965, the average net after-tax profit rate of domestic non-financial corporations plunged to less than 6 percent during the second half of the 1970s—a decline of more than a third.”26 After twenty years of continual expansion during the long postwar recovery, profits began to sag in 1966 and continued to decline steadily until 1974, until they reached a low of around 4.5 percent.27 The same pattern was visible from Germany to Japan, as all advanced capitalist countries experienced an after-tax profit decline of between 20 and 30 percent.

  Robert Brenner, a leading scholar on this history, put it this way: “Due to the onset of over-capacity and over-production, world manufacturing prices had been unable to grow in line with product wages and the cost of plant and equipment: the result was falling profit shares and output-capital ratios, making for falling profit rates.”

  How was this to be dealt with?

  Fundamentally, for profits to recover, wages had to fall, and not just wages, but the social wage—the share of national production redistributed to the working class in the form of public goods like government-funded education, health care, and welfare. Rescue arrived in the form of Paul Volcker, the new chairman of the US Federal Reserve. Beginning in 1979, Volcker began a dramatic rise in interest rates from 7.9 percent in 1979 to 16.4 percent in 1981. This had the effect of cutting borrowing throughout the economy, and with that, investment and consumer spending also ratcheted down abruptly. Unemployment reached 10.8 percent by December 1982.28 At the same time, both Reagan and Thatcher launched offensives against the power of organized labor, cut social spending, and slashed taxes on the wealthy. As a result, the US economy plunged into what was then the most severe recession since the Great Depression.29 In the process, it dragged down many of its trading partners with it, as US imports shrank radically.

  In Latin America the new monetary policy also meant that interest payments on existing debt soared. Thus began the Latin American debt crisis. From 1978 to the end of 1982, total Latin American debt more than doubled, from $159 billion to $327 billion. Debt servicing—that is, interest payments—grew even faster: the average Latin American country used more than 30 percent of its export earnings just to service its debts. Brazil paid nearly 60 percent.30 Journalist Andres Oppenheimer explained, “As the old debt gets more expensive it begets new debt; to meet their interest payments the major Latin American countries have had to rely more and more on emergency loans from the International Monetary Fund and commercial banks. In effect, they are receiving with one hand and paying back with the other.”31 As public debt soared, the Brazilian currency lost value until chronic inflation became hyperinflation, hitting 1,765 percent by the end of the 1980s.32

  Austerity

  The solution to the crisis came in the form of IMF- and World Bank–enforced austerity. In 1983 Brazil had the largest foreign debt of the developing world: $83.8 billion. Just to service its debt, it had to borrow more and more in a downward spiral. In early 1983, Brazil went to the IMF for $6 billion, then the single-largest loan in the Fund’s history. In return, Brazil agreed to a brutal austerity program: to cut inflation, growth was strangled, public spending cut, the currency devalued, imports restricted, public assets privatized, and exports boosted.33 In São Paulo, workers soon rioted.34 Over the next decade the crisis dragged on.

  Brazil’s military government did push back a bit, resisting the Bretton Woods institutions’ more draconian stipulations. As Finance Minister Dilson Funaro explained in 1986, “
The way out of the debt crisis is through growth, and the IMF formulas don’t provide growth.”35 But, in the end, neoliberalism won; deflationary austerity, deregulation, privatization, aggressive exporting, unemployment, suppressed wages, hunger, corruption, crime, and migration all defined the economic landscape.

  Unfortunately, Brazil’s export drive took place amidst falling commodity prices. Two factors contributed to this. The Bretton Woods institutions were simultaneously pressuring other Third World debtors to export more; meanwhile, deep recessions and high interests rates in the richer countries held down consumption. Increased supply plus reduced demand meant plummeting prices. Sugar, copper, aluminum, and other raw materials all hit deep lows.

  The IMF’s structural-adjustment program resulted in higher unemployment, rising poverty, and growing urbanization as the rural poor went to cities in search of work. From 1980 to 1990, Rio’s overall population growth rate was 8 percent, but the favela population surged by 41 percent. As economist and Latin America expert Mark Weisbrot explained, “From 1960–1980, income per person—the most basic measure that economists have of economic progress—in Brazil grew by about 123 percent. From 1980 to 2000, it grew by less than 4 percent.” Weisbrot estimates that, had Brazil not embraced neoliberalism, “the country would have European living standards today. Instead of about 50 million poor people as there are today, there would be very few. And almost everyone would today enjoy vastly higher living standards, educational levels, and better health care.”36 Even if Weisbrot overstates the case a bit (Which Europe? Rural Greece or urban Holland?), his larger point about neoliberalism’s damaging impact is valid.

  Human Costs

  Had Brazil not embraced neoliberalism, violence would surely be less of an issue. As poverty increased and the favelas grew, social relations within them frayed. Amidst this neoliberal transformation, the Comando Vermelho and other gangs grew to become guerrilla armies minus the ideology or political cause, employing only the methods and organization of war.

  “By 1991 the CV had become purely criminal. There was no ideology anymore,” explained Commander Rodrigo Oliveira of Rio’s Civilian Police Special Forces when I met him in his office to discuss the gangs and the war on them. “Now their goal is power, plain and simple—not even huge private fortunes for the slum ‘owners,’” he said, using the colloquial term for the gang leaders. “Mostly it’s just about organizational power, weapons, and status.”

  Academic analyses of Rio’s gangs often note the absence or failure of state institutions. Others, most notably Enrique Desmond Arias, argue that the criminal structures in the favelas bring together gangsters, police, community leaders, and mainstream politicians in a matrix of mutually beneficial relations. Such an arraignment, essentially the criminalization of the local state, has evolved out of the crisis of neoliberalism.37 To the extent that Arias is correct, criminality in the favelas becomes a matter less of state withdrawal and more of societal rot—a whole society infected by the gangrene of sub-rosa economics, corruption and violence.

  Nordeste

  The red flag of revolution whips in the hot wind atop a roughhewn pole. Below it sits a small squatter camp where poor farmers occupy land belonging to a distant and wealthy rancher. Welcome to the hot scrublands of the Nordeste and the tiny village of Boqueirão in Brazil’s Ceará Province. The village sits on a dusty one-lane track at the bottom of a long valley, hemmed in on either side by looming mountains of dark, barren rock. If you look on Google Maps, Boqueirão is, roughly, due north of Iracuba, which sits on the road BR 222. The long valley shows up like a pale scar amidst the dark hills.

  On one side of the road is the village of solid little whitewashed homes, with smooth cement floors and red-tile roofs. On the other side is the camp of peasant activists, members of the landless people’s movement Movimento dos Trabalhadore Rurais Sem Terra (MST). The MST is a social movement of some 370,000 people organized in more than 1,000 communities across Brazil. Their objective is simple: redistribute land to hungry farmers. And in the last twenty years they’ve had remarkable success. Their methods are also simple: move in and start using the land. That is what is happening here. The MST cadres have used heavy black plastic and wood to build two long, collective shacks called barracos, or “barracks.” One is for cooking, eating, and meeting; the other, strung with hammocks, is for sleeping. The camp is never left unoccupied.

  Drought Land

  The Nordeste is semiarid, receiving very little rain. Severe floods punctuate its frequent droughts. In 1877 to 1879, a catastrophic drought killed more than five hundred thousand people and sent the rural Northeast into political crisis. 38 Now, fear of drought is etched in the region’s culture. For example, in parts of Ceará, the year traditionally ended with drought-prediction rituals. On December 13, the eve of St. Luzia’s Day, an old man would set six pieces of rock salt out on a banana leaf, each piece representing a month of the upcoming rainy season. The following morning, the salt pieces that had melted away in the dew symbolized the months of the coming season that would receive rain. The farmer who explained this tradition to me also said, “It doesn’t seem to work well anymore.” In any event, research indicates that the drought cycle “has become more frequent over the last century, with five droughts recorded during the current decade.”39

  The rainy season in Ceará runs from January to June, with much variability in duration, timing, and intensity and between localities. The rain is delivered as the Intertropical Convergence Zone moves to its southernmost position.40 A study in the Journal of Applied Meteorology finds that sea surface temperatures are the primary factor responsible for “the interannual variability of rainfall in northeast Brazil,” meaning among other things that droughts “tend to coincide with the warm phase of El Niño–Southern Oscillation (ENSO) episodes.”41

  More broadly, regional studies of temperature trends in the region “show changes that are in line with expected warming, most notably warmer nights.” The majority of climate models find that northeast Brazil “is expected to experience more rapid warming than the global average during the 21st century.” Depending on the model and the potential amounts of greenhouse gases loaded into the atmosphere in coming decades, projected temperature increases for this century range from 1°C to 6°C. In more concrete terms, most forecasts predict northeastern Brazil will be a region of very severe water stress by 2050.42

  Rio’s favelas are largely populated by people from these dry lands. Despite its harsh climate, the Northeast is densely populated.43 As climate change grinds down subsistence farmers, more Nordestinos leave to search for work either in the depressed cities of their nearby coastal areas, like Fortaleza and Recife, or down south in the megacities of São Palo and Rio. Thus, the social dimensions of the ecological crisis in the Nordeste (a frontline region for climate change) are expressed in cities as unemployment, makeshift housing, the narcotrade and violence.

  In this light, we can read the struggle of the farmers in Boqueirão as an inadvertent struggle against violence and social breakdown in the cities. At the same time, their struggle to stay on the land is a struggle for social justice in one of the most unequal countries in the world. It is also a struggle to adapt to climate change in an already extreme environment; as such, it encapsulates the possibilities and perils of Brazilian life in the face of the catastrophic convergence.

  Technologies of Adaptation

  “Thank God we are all strong people. We don’t take loans,” said Osmar Careinro Araujo. We were sitting in the shade of the MST camp’s kitchen shack; around us the afternoon landscape was still and hot. Everything seemed to be waiting for the sun to relent. Osmar, the de facto community leader, was in his early forties, short and dark, with squinty, thoughtful eyes and a full black mustache. He had come up with the idea of the land occupation. He said,We had a few years without bad drought. And then last year—we have never seen a winter like that. It rained until August. As for the temperature rising, we can’t measure this, but
it feels much hotter. We feel the increase over the years. And for agriculture this is bad. Last year we had a really bad year. Because it flooded, we lost 50 percent of our beans. The fava did well. But there was a bumper crop, so prices were low. A real farmer always keeps back some seed. We are okay despite last year. But if the weather is really bad again we will have a hard time to recover.

  This community has twenty-seven families, most of them related to each other. In face of drought and flooding, they have begun to adapt both technologically and politically. First, they switched from monocropping cotton and beans, which require burning the fallow fields and using expensive chemical inputs, to a form of mixed-crop agroecological farming, agroforestry, and integrated pest management that uses few or no chemical pesticides or fertilizers. They are also using inventive forms of low-impact water-capturing and rain-harvesting technologies.

  Osmar and some of his compatriots take me across the road to show me “the system” and some of their alternative water-harvesting techniques. One method involves building “underground dams.” It goes like this: First the farmers find a dry streambed or natural area of drainage. At the bottom of this feature, below and away from the slope of the hill, they dig a long ditch across the natural path of drainage. The ditch may be one hundred or three hundred feet long and deep enough to hit solid rock—here, about five to ten feet down. Then, within the ditch, they build a cement and rock wall—or dam—lined with heavy plastic. Then the ditch is filled in, and the wall is buried. This underground dam greatly slows the natural drainage and creates a moist and fertile field “upstream.”