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The Camaçari Industrial Complex in Bahia attracted worldwide attention following BYD’s announcement in 2023 that it would be home to the electric vehicle company’s largest factory outside China. Inaugurated in 1978, the industrial hub was Brazil’s first planned petrochemical complex, forming the centerpiece of a national industrial development project that ran until the end of the 1980s. The complex has historically contributed to economic development in the region by generating employment and providing job training opportunities. From the 1990s onwards, however, amid the liberalization of trade and rise of foreign competition, the complex underwent significant structural changes.
Camaçari has always hosted industries that complement the petrochemical chain, but its twenty-first century expansion was sparked by the arrival of the automobile industry. American automaker Ford set up shop in the 2000s, but after two decades of operation, Ford closed its doors in 2021 and halted production of the low-margin light vehicles EcoSport, T4, and the Ford Ka. Today, the complex is undergoing yet another process of sectoral expansion, attracting investments from electric vehicle manufacturers and renewable energy companies, mostly of Chinese origin. Emblematically, the new BYD factory is being built on the former Ford site, with its address on Avenida Henry Ford.
Over the years, the petrochemical center first emerged as an industrial center, and it is yet again poised to transform into a green industrial center. Alfredo Santos is the General Secretary of CUT-Bahia and press coordinator for the Chemical, Petrochemical, Plastics, Fertilizers and Chemical Terminals Workers’ Union (Sindiquímica). In the following interview, Santos speaks with Phenomenal World editor Maria Sikorski about Camaçari’s role in Brazil’s project of green reindustrialization from the perspective of the working class. The transcript has been edited for length and clarity.
An interview with Alfredo Santos
Maria Sikorski: Can you tell us about the history of the Camaçari complex and its relationship to Brazilian industrial policy?
Alfredo santos: The Camaçari complex was built between the mid-1970s and the early 1980s. It emerged as a tripartite ownership model: the shareholder composition included national private capital, multinationals, and Brazilian state capital. A raw materials plant controlled by a public company, Copene, which was later privatized, promoted second-generation industries. The petrochemical plant supplied the basis of the production chain for naphtha, ethylene, propylene, etc. The tripartite ownership model is an example of how industrialization in Brazil has only occurred with strong state participation, either directly, as was the case with the Camaçari complex, or indirectly, through Brazilian Development Bank (BNDES) financing. Both when the complex was first set up and today, private companies—including Chinese companies that have recently set up shop—have received funding from the Bank. It is the Brazilian state that finances industrialization.
Camaçari continued to grow throughout the 1980s and 1990s. However, since the opening up of trade under the Collor government (1990–1992) and more markedly during the government of Fernando Henrique Cardoso (1995–2002), the complex has faced a crisis of productivity and international competitiveness and as a result has suffered from reductions in investment and factory closures. At the beginning of the 1990s, the complex accounted for more than 30,000 direct jobs. By the end of the decade, the number had fallen to just over 10,000.
From 2003 onwards, with the first Lula government (2003–2010), the Brazilian state once again invested in industrialization, but indirectly: Petrobras became an important investor in Brazil’s so-called “big players.” One outcome of this process is Braskem—Petrobras now holds 47 percent of the company’s shares. Some international competitiveness has been regained, but the production of central raw materials and the thermoplastic resin chain has been increasingly monopolized, resulting in the closure of several companies that were unable to compete with the big players.
The Brazilian petrochemical sector today faces a massive crisis. The Camaçari complex is unable to compete internationally. The fertilizer sector is a case in point: 85 percent of the fertilizers used by Brazilian agribusiness are imported. The thermoplastic chain imports around half of the inputs it uses. This influx of imported products into the petrochemical chains happens for two reasons. The domestic cost of the chains has become very high compared to more modern chains that are gas-based instead of naphtha-based. The US, Arab, and Indian industries export a product at a lower price than our domestic production cost, both because of the lack of technological advancements in our plants and because of environmental factors: the US, for example, uses gas from fracking, which has a much lower production cost, but is extremely damaging to the environment. Brazil does not produce gas from fracking and even has environmental restrictions on its use. What’s more, the price of Brazilian natural gas is up to five times higher than the US price. This undermines the international competitiveness of our petrochemical industry. If the country doesn’t have an industrial policy aimed at preserving the domestic market, the tendency is for all these industries to go under.
MS: Bahia has been identified nationally and internationally as an essential part of Brazil’s green reindustrialization project and the global energy transition. It is the state that produces the most renewable energy from solar and wind sources in the country and has attracted a lot of foreign investment, especially Chinese, in these production chains.
With the promise of BYD’s electric car manufacturing and the installation of other Chinese companies in the renewable energy sector, some say that Camaçari could become a catalyst for the green reindustrialization of Brazil. When announcing the installation of the factory on the former Ford site, for example, BYD promised to bring high value-added stages of the electric vehicle production chain to the complex, including those related to research and development, as well as generating thousands of jobs. BYD’s CEO for the Americas, Stella Li, stated that the aim was to turn Camaçari into a “Brazilian Silicon Valley.”
Amid a crisis in the petrochemical sector, does the entry of other supply chains represent a resumption of Camaçari’s role in national development?
as: The Ford plant, inaugurated in 2001, represented the start of the automotive chain in the Camaçari complex. In 2021, after twenty years, Ford closed its operations and more recently Chinese companies such as BYD have started to invest in the auto supply chain. Other Chinese companies in the renewable energy sector, such as Sinoma and Goldwind, have also set up shop in the complex. The process of attracting BYD to Bahia involved a significant amount of state subsidies. The government of Bahia made electric cars exempt from the motor vehicle ownership tax (IPVA) from 2024, for example. BYD also received public incentives for utilizing the land that belonged to Ford, and the company also received funding from the BNDES.
Although the BYD plant is promised to actually function as a factory, right now, these companies are only operating as assemblers, practically maquiladoras. The higher value-added stages of the supply chain are not yet in Bahia. The petrochemical complex has great potential for battery production, but the batteries for these vehicles have yet to be produced here. There’s also a potential for lithium processing, as well as in the plastics industry for the production of parts. It is possible to produce the cars here, but so far BYD’s promise has not materialized.
What can we demand from these companies to accompany the state subsidies? This is the role of the Brazilian state in the project of reindustrialization. If BYD only sets up mere assembly plants, what do we get out of it? Now, if the state demanded that, within a certain period of time, BYD process lithium in Brazil and manufacture batteries here, that it use local industries to manufacture parts, that it actually have parts of the production chain operating here, things would change.
In the past, there was a similar debate in the petrochemical industry. The national content policy for the oil product stream—abandoned after the 2016 coup—required every industry that provided services to Petrobras to have a percentage of its machinery produced in Brazil. The country’s shipbuilding industry was reborn during that period and, when local content was no longer required, it broke down again.
Brazilian industry can’t compete without some form of state incentive. There is no industrialization without state participation. If the industrialization project doesn’t require counterparts to foreign investment, be it American, Chinese or from anywhere else, Brazil will simply play a role in another country’s industrial policy. No company decides to expand its operations to another country altruistically. If it invests, it’s because it serves its own interests. And investment, from whatever source, is always good. The question is what we demand of investors in order to satisfy national interests as well.
For many years, Brazilian industrialization was very dependent on the United States. If we simply replace US imperialism with Chinese imperialism, we’ll end up with the same result. We can’t simply cater to the interests of those who want to invest. Foreign investors want to make a profit. What does the country gain when it subsidizes their profit-making?
MS: How does the Bahia trade union movement view the role of the New Industry Brazil (NIB) program in promoting the national interest in the country’s green reindustrialization project?
as: So far, NIB is just a plan on paper. It’s difficult to analyze without observing the real impact through data, and the program hasn’t yet shown what it will become. But one thing that’s important to keep in mind when talking about green industrialization is: who pays the price?
In the trade union movement, we jokingly say, “Well, alcohol is a cleaner fuel than gasoline, but I’d rather work at Petrobras than in the alcohol industry.” The green industry cannot be made economically viable by reducing the cost of the workforce. What we have seen is that the supposedly most sustainable sectors of the industry today are the ones with the most precarious jobs. If biodiesel has a higher production cost than diesel, how do you ensure that the green alternative reaches the pump at the same price? By making the workforce in the biodiesel production chain more precarious. That’s impossible!
This contradiction exists not only in Brazil, but all over the world: the dirty industries, the oldest ones, are the ones that offer the best working conditions, including from the point of view of workers’ health. You only have to look at the working conditions in a sugar cane mill or in the aluminum recycling industry with can collectors. Someone might say that waste pickers aren’t part of the recycling industry, but the fact is that the recycling industry only exists in Brazil because of waste pickers. Brazil is the record holder in aluminum recycling, not because it has a great logistics project, but because there are a lot of impoverished people who need to collect cans to survive and who, in doing so, foster a production chain that is extremely profitable.
Electric cars are another example: due to the technology used, the sector generates far fewer jobs than the combustion car industry. It’s much simpler engineering: the electric vehicle has a body, battery and engine, while the combustion car has oil, a belt, filter, head, piston, connecting rod. In short: several other factories are needed to supply products and parts for this industry.
The trade union movement’s criticism of renewable energy chains follows the same line. Today, Bahia is the state that produces the most clean energy in Brazil and basically “exports wind” to the South and Southeast of the country without any compensation for the communities where the wind farms—which have a huge social and environmental impact—or the solar panels are installed. At the same time, the parts of the production chain that generate the most jobs, such as the manufacture of turbines, photovoltaic panels and maintenance parts, are not here. We are left with the worst part of the whole supply chain: the one with the greatest impact and lowest return. This is a localized reproduction of the same dynamic that can be observed between countries at the center and periphery. Will the role of the Northeast in Brazilian industrialization be reduced to generating energy and carbon credits to be consumed in the South and Southeast? The Northeast is the region in Brazil that produces the most solar energy, but it doesn’t have a photovoltaic panel factory.
In the same vein, I believe that the NIB needs to include a geopolitical discussion about Brazil’s green industrialization objectives. Are we going to pay for the energy transition of the countries that have historically polluted the most? Will our role be to generate clean energy and carbon credits for the countries of the global North to consume? Once again, it’s the weaker that end paying for the energy transition. So far, it seems that the lowest value-added, least complex and least job-generating parts of the green production chains are those in Brazil or other peripheral countries. This is the persistent international division of labor. The most precarious jobs stay in the periphery and the most technologically-advanced and well-paid jobs stay in the center of capitalism. The NIB needs to engage in dialogue with the Chinese interest entering Brazil, for example, to demand counterparts to the state subsidy that would reverse our subordinate role in the international division of labor.
Obviously, we are in favor of promoting green industry, but we argue that it should come with state funding. The state, not the worker, should pay for the transition. When the economic viability of biodiesel comes from the precariousness of the workforce, the state is making the worker pay for the energy transition. On the contrary, we advocate for a truly just energy transition.
MS: So how would you summarize the trade union movement’s demand for Brazil’s green reindustrialization?
as: The trade union movement’s demand is that green industrialization should not lose sight of the fact that workers are a fundamental part of this process. The quantity, quality, wage, and other conditions of these jobs generated through green industrialization must be equal to or better than what was observed in previous industrialization processes. Under no circumstances can we continue to use job insecurity as a mechanism to make green industry economically viable. The energy transition needs to happen, the planet can’t wait, but it needs to happen bearing in mind that workers are also part of the environment. If we sacrifice workers, who will the transition save?
In North America, few places have come to symbolize the transformation of economic development in the neoliberal era more intensely than at the border between the United States of America and Mexico. As international economic integration remade the national developmentalist projects of the postwar era, Mexico followed much of the developing world in increasingly turning to export markets rather than domestic consumption spending as the engine of economic growth. With global demand limited to a small number of high-consumption countries, manufacturing became a hyper-competitive industry. Governments that once promoted collective bargaining and internal redistribution turned to repressing wages and lowering taxes to earn diminishing shares of the value of final products.
The maquiladora has become the symbol of this transformation. But alongside these changes in modern production and cross-border trade, the growth of manufacturing in Mexico has produced some of the most militant labor organizing on the continent. Since 2019, when the Mexican government strengthened its collective-bargaining laws, organization has spread across the continent’s workshop.
Jeffrey Hermanson, a labor organizer who began his career with the International Ladies Garment Workers Union (ILGWU) during the late 1970s, witnessed these events first hand. Following the migration of the textile industry after the passage of NAFTA, Hermanson worked in Mexico as a representative of the AFL-CIO Solidarity Center from 2000 to 2003 and later served as the director of global strategies at Workers United-SEIU. He has lived primarily in Mexico since 2019, when the Solidarity Center appointed him Director of Organizing in Mexico, a position from which he retired in 2022.1 Phenomenal World spoke with Hermanson about the evolution of North American manufacturing and its creation of a new working class in the export industries of Latin America. The following interview has been edited for length and clarity.
An interview with Jeff Hermanson
Andrew elrod: What is a maquiladora today, after NAFTA?
Jeff hermanson: The word maquila means mill—it refers to a subcontracted labor-intensive process. From the 1980s, unfinished goods were shipped across the border from the US and shipped back, but they initially couldn’t be sold in Mexico. Today, a maquiladora is basically a separate tax regime. There are industrial parks all over Mexico, but you don’t have to be in an industrial park to be a maquiladora. The maquiladora incentivizes foreign direct investment by lighter taxation and allows for negotiation with the local authorities for land and other utilities, water being one of the most crucial.
The maquiladora largely established itself in large factories on the US-Mexico border in the early years of NAFTA. The factories were well capitalized, and workers came for the jobs from all over the country to settle in poor communities they built themselves. I visited a free trade zone, or industrial park area, a few years after NAFTA was passed and saw really poor conditions, with low wages that were insufficient for supporting human life. The houses were built out of pallets. There was a song, “Techos de Carton,” about people living in cardboard shacks in Mexico. Electricity was brought in with homemade attachments to electricity lines overhead, and with wires all over the ground to run into these houses. The dirt streets turned to mud when it rained. This was a barrio obrera in the late 1990s.
Prior to 2018 and the Morena government, it was widely known that these companies were given land for free as well as tax concessions. For ten years, they wouldn’t have to pay any tax on the land or the buildings. They also received special deals on energy and water. With Morena, concessions for maquiladoras have been revised to equalize the tax rate with other companies, rather than giving an unfair advantage to a foreign invested firm. Maquiladoras have been required, more and more, to meet the same regulatory requirements as any company. There’s still favorable treatment of big investments. Nestlé, for example, just announced a $400 million investment in Chiapas, and they will receive favorable terms on the use of water. Here in my local community, there is a maquiladora making sweatshirts and hoodies for Fanatics and Columbia Sportswear, which has a special contract for the use of water. In an area where water’s at a premium, they get a relatively good price, and they use a lot of it to dye and launder garments.
AE: The phrase “runaway shop” was commonly used during the fifties and sixties, much earlier than “deindustrialization” entered the conversation. How has that concept changed over time with the rise of the maquiladora, NAFTA, and what we call neoliberalism?
JH: During the fifties and sixties employers were running away from the Northeast and Midwest to the US South and Puerto Rico, which was much less unionized and had much lower wages. In garment manufacturing, where I began organizing for the International Ladies’ Garment Workers Union (ILGWU, or ILG), the core of the US industry had been New York City, Philadelphia, Chicago, and a little bit in Canada. But in the fifties it all started moving south.
In 1965, the Congress passed Item 807, which is part of the US Tariff Schedule.2 This permitted garment manufacturers to cut goods in the United States, send the pieces to the Dominican Republic and other Caribbean sites to be sewn together and then export it back to the US duty free. By the late 1980s the Dominican Republic became the site of free trade zones employing a couple hundred thousand workers sewing apparel for the US market.
Hosiery and other intimate apparel had been in the upper US South, already on a runaway from the northeast. In the seventies and eighties, these companies set up their factories in Puerto Rico. From there it was a short jump to Central America. This was the next phase, which was pioneered by the intimate apparel industry: Maidenform, Fruit of the Loom, and Hanes are the big three. Underwear manufacturers moved primarily to Honduras and El Salvador. Those companies were more capital intensive— knitting, cutting, and sewing were all integrated in big factories owned by the manufacturers—and they moved their whole shops, with Honduras being the industry’s geographic core.
Other parts of the garment industry did the same thing on the southern border with Mexico. Prior to NAFTA, there was a twin-plant system, a cutting factory on one side of the border and a sewing factory on the other. Calvin Klein jeans, for example, were cut in a union shop in El Paso, Texas, then sent to Durango and Coahuila in Mexico to be sewed together and imported back under Item 807. With NAFTA, the need to cut garments in the United States was eliminated.
AE: When did you begin working with the ILG?
JH: I started with the ILG in 1977, at the beginning of the offshoring process. We organized a strike in 1979 against a sportswear firm in New York City, and one of the workers, a Dominican cutter, told me that the cut goods were being shipped to the Dominican Republic. That was new for him, and he was shocked. That was the beginning of offshoring, and it grew by leaps and bounds during the eighties.
The union had a slogan, “follow the work.” We followed the work, out of New York City into Pennsylvania and beyond. But when we went to the South, it became much more difficult because of the racial divisions in the workforce and employers’ use of those divisions to defeat unionization efforts. We organized Kellwood in Mississippi, a big firm owned by Sears that employed thousands of workers. We followed Calvin Klein to El Paso, Texas, and organized the factory there. We had several other successes in the South, but it was more difficult than in the Northeast.
In 1990, the Dominican Republic passed a new labor code under pressure from the AFL-CIO. The Dominican unions came to the US and asked for assistance in organizing workers in the free trade zones, which their government had set up specifically for this work. At that time, there were already over 100,000 Dominican workers in those free trade zones producing apparel for the US market. We went to the Dominican Republic, trained about twenty organizers, helped the Dominican union organize ten or eleven factories—over 10,000 workers—and built a strong garment workers union in the Dominican Republic, which still exists. All these factories were producing for US brands. But with NAFTA, we basically lost control of the industry. The whole process, rather than just the sewing, was now done in a maquiladora. We were not able to follow the work into Mexico at that time.
AE: You mentioned a change in the US tariff code to enable this kind of business. What were the changes in the laws of the other countries?
JH: From the forties through the seventies, Mexico followed an import substitution model, which emphasized local production and national producers. Quite a few of them were state-owned. Even in the auto industry—trucks, buses, and agricultural equipment were produced in state-owned enterprises. That model began to exhaust itself in the late seventies and early eighties. There was an external debt crisis, and neoliberalism became the ideology of international trade and investment—the Washington Consensus, Thatcher, and Reagan. This required changes in law in Honduras and Central America—where the intimate apparel industry had already relocated production—and in the US. The Caribbean Basin Initiative, for example, enabled these industries to invest internationally in response to the competitive pressures that existed in the US.
In Mexico, this meant the sale of the state-owned enterprises, the privatization of production generally, and the end to as many trade barriers as possible. The maquiladora was the first step in that process. A very strict trade regime initially prevented maquiladoras from competing with local firms. But when those restrictions were lifted, many were pushed out of business.
The story differs from industry to industry. The auto industry, for example, has a long history in Mexico. Ford has been in Mexico for a hundred years and has developed an internal market for their product. In textile and apparel, there are still domestic firms that produce entirely for the Mexican market. Even in steel and heavy industry, there’s part of the market that is truly producing for domestic consumption. Because of Mexico’s historic national economic model, many did not agree with this loosening of the regulation of import and export. But they were a minority, and the political forces were such that regulations became looser and looser.
AE: When was the first time that you went to Mexico?
JH: The first time I went to Mexico was in 1994, when NAFTA was passed. Prior to NAFTA, the national textile and apparel industry was quite strong in Mexico. They produced the textiles in fairly large modern plants and had an industry-wide labor agreement for the textile sector. It was unionized and prosperous, and the union contracts were fairly good.
That has been totally undermined by the competition with garments made in maquiladoras. But even more today, the Mexican garment industry has been undermined by import competition from Chinese-produced garments. That national industry has been decimated, and the conditions are in grave decline.
AE: What is the labor law in Mexico as it relates to labor organizing? In the United States, for example, unions in the private sector must be certified by a federal agency, the National Labor Relations Board (NLRB), to enjoy legal protections. Workers have organizing rights without a certified union, but these are also enforced by the NLRB. In Brazil, there was a long tradition of union jurisdictions being written into law, and the representatives being funded through a special labor tax, a kind of “dues checkoff” through the state. What is the Mexican labor regime?
JH: From the mid-1930s up through the 1990s, Mexico’s was a “corporatist” labor relations regime: the government supported the organization of workers into big national industrial unions and a confederation of those unions, which became a pillar of support for the political party, the Partido Revolucionario Institucional (Institutional Revolutionary Party, PRI). The Confederación de Trabajadores de México (Confederation of Mexican Workers, CTM) was formed during that period in the late thirties—like in the United States, at the time of the Wagner Act and the growth of the Congress of Industrial Organizations—when millions of workers organized under a fairly favorable labor law.3
The CTM unions mainly covered workers in those sectors that were either state enterprises or quasi-state enterprises, like the electrical energy industry, the petroleum industry (which was nationalized in 1935), telephones, steel, mining—all these big national basic industries. Those unions in turn supported the political party, providing privileges to the organized segment of the industrial workforce. This approach, incorporating labor unions into the political structure of the state so they become “official unions,” is called corporatism.
AE: That sounds very similar to the US and other labor-aligned political parties of the mid-century—the government supporting large industrial unions with an implicit or explicit political agreement that those unionized workers would then support the government. To an important extent, that’s the story of Franklin Roosevelt and the CIO. What is the importance of understanding this as “corporatist,” as a regime of a different type to the US?
JH: The biggest distinction is that in the US the CIO was organizing private enterprise, privately owned industries. In Mexico, a lot of the industries were state-controlled, either state-owned or operated—petroleum, electricity and telephones—and their workers were public-sector workers. Teachers, for example, still make up the largest union in Mexico.
I’ll also point out that the union activists who led the formation of these unions were communists and anarchists and socialists. But the government was not a socialist government, although they did nationalize industries. There was, consequently, a very tight political control over the organizing of the industries and the unions. Legal certification was determined, and disputes were settled, by a federal board and the Local Boards of Conciliation and Arbitration, which were tripartite in structure: the government, the employer, and the unions appointed these boards. It was a condition of membership in the union to be a member of the PRI. When there was an election, the union would organize buses to take the workers to the polls, or to demonstrations in favor of the candidates. It was a very tightly controlled corporatist labor movement (incorporated into the political structure), and in the US there’s nothing like that.
AE: Except during the 1930s—“Franklin Roosevelt wants you to join a union” was a big part of the 1936 election. That relationship intensified during World War II, in the 1940 and 1944 elections.
JH: Wartime capitalism in the US approached the corporatist structure. There was the War Labor Board and its sectoral wage-setting boards. That’s quite true. There are similarities between the approach of the Cardenas government in Mexico and the Roosevelt government in the United States. The Democratic Party did want to control the labor movement. They weren’t as able to at first. They were able to get David Dubinsky and John L. Lewis to come to the White House, but John L. Lewis could not be controlled. “You can’t dig coal with bayonets,” as he said. But with the beginning of the Cold War, the US government and employers used anti-communism to pass the Taft-Hartley Act, which weakened the labor movement and halted its growth. Rather than control labor by bringing it into the political structure, in the US the choice was made to control labor by weakening it and subjecting it to regulation.
In Mexico,the period of the “Mexican Miracle” (1940–1970) saw the growth of a narrow, privileged organized sector of the working class in the corporatist unions. They were becoming middle-class workers. But they never amounted to more than a small percentage of the overall labor force, which included millions of rural poor. The privileged position of unionized workers began to break down for a couple of reasons. In the sixties, there were several rebellions by workers against the tight control of the unions, most of which were repressed by the union leaders with the help of the PRI government. In October 1968 the Mexican military, acting at the direction of the president Gustavo Diaz Ordaz, massacred hundreds of protesting students in Mexico City. There were uprisings in the countryside in southern Mexico and in certain urban areas in the north of Mexico, where people began forming guerilla groups. There was an uprising by dissident workers in the Ford plant in Cuautitlan, in the industrial belt around Mexico City, that the incumbent CTM union, colluding with Ford management, put down violently with 300 golpeadores (thugs). The international situation—France in 1968, the US Civil Rights and Anti-war Movements—contributed to the government’s paranoia. There was a sense that revolution was in the air. The government of Mexico treated this as a real threat.
Another factor was the increasing corruption at all levels of the government, the PRI political party, and the trade union leadership. Carlos Hank Gonzalez, one of the most famous politicians in Mexico, had a saying: “a politician who’s poor is a poor politician.” It’s just open corruption. “Quien respira, aspira,” (literally translating to: He who breathes, aspires) is also a saying from the legislator Saúl Monreal, who after jumping from party to party has joined the ascendant Morena.4 It became shameless, really.
This combination of the growing, open corruption and repression coincided with the waning of the Mexican miracle in the late 1960s. The union leadership didn’t take action against it, they joined in the corruption. They began to survive on their relationships with the employer and the government, not on their relationship with the workers. Of course, there were also some leftist independent unions formed in the 1970s that organized in the industrial belt around Mexico City.
AE: NAFTA was signed in 1993. What was the motivation for this, given how much integration already existed?
JH: My feeling has always been that, in the US, employer support for NAFTA was a union avoidance strategy. Since the PATCO strike was crushed by Reagan in 1980, the employers continued their attack on the labor movement, and by the mid-1990s they decided they could use Mexico as a low-wage preserve. In the summer of 1996, my union, UNITE, launched a big strike against Guess Jeans in Los Angeles, where there were 3,000 workers in several dozen small sweatshops.5 The strike shut down their production in the Los Angeles area, so Guess picked up and moved their production to Mexico.
We filed unfair labor practice charges with the NLRB, which initially agreed with us that the move was illegal and indicated they would issue a complaint.6 But they didn’t, and ultimately found that Guess had been planning this move all along, and therefore it was not a response to the strike.7 While it might have been true that Guess had investigated such a move, I truly believe that the Board’s finding was a political decision by the Clinton administration. NAFTA was three years old: they could not penalize a company for moving to Mexico to escape the union, because that would have restricted NAFTA’s implementation. Guess Jeans was a major campaign contributor to the Clinton campaign. We lost that strike: the jobs went to Mexican sweatshops and Guess Jeans prospered.
The complexity of the pre-NAFTA supply chain, at least in the apparel industry, was also a motivating factor for companies to support NAFTA. The nature of the industry was changing. “Full package producers” were beginning to take charge of the total production process. Even some parts of the design process were being done by big contractors in Asia and in Latin America. This was a development in Mexico primarily in the 1990s. A company like Calvin Klein became a design and marketing firm, employing no production workers at all.
That process has continued until the present, facilitated by NAFTA. Calvin Klein, Tommy Hilfiger—these companies are now just names. They have zero production employees. The labels are owned by PVH, which is a company that owns brands and contracts out production throughout the world. This way, they can take advantage of the cheapest labor they can find and avoid any threat of unionization.
AE: How has labor organizing in Mexico shifted with this regional integration before and after NAFTA?
JH: In the West, in Tijuana and Mexicali, there were sweetheart unions, corrupt mafia-controlled unions that made deals with the employer before they even set up business. In Juarez, which is across from El Paso, there were no unions whatsoever and workers organized at the risk of their lives. During the maquiladora boom of the 1990s and 2000s, hundreds of young women workers were murdered and disappeared by criminal gangs—a climate of violence and insecurity in which maquiladora employers’ union avoidance strategy was very successful.
On the east end of the border—Matamoros, in the state of Tamaulipas—there was a union that grew out of the workplace. It was a traditional CTM union, the Sindicato de Jornaleros y Obreros Industriales y de la Industria Maquiladora (SJOIIM), representing around 150 to 200 factories in Matamoros. But its leader, a man named Agapito Gonzalez, was determined to get a good deal from the employers. During the 1980s, he negotiated contracts that won wages significantly higher than other maquiladora regions. They also contained clauses that said wages would be in reference to the minimum wage, so that minimum wage raises would raise all wages under the contract. It was unique in the maquila sector.
Gonzalez has passed away, and his successor Juan Villafuerte has faced some rebellion from workers who feel he is less committed to fighting for their interests. In January 2019, the federal minimum wage on the border was doubled by the new Morena government. Under the Gonzalez contract language, this would have meant doubling the wages of the workers already earning above the new minimum wage, but the union leadership refused to enforce this language. This led to a wildcat strike of 45,000 workers in forty-eight maquiladoras in Matamoros—a huge event after Morena had just come into power.
The employers immediately got the governor to request a federal intervention to stop the strike, as they would have ordinarily expected. But the Deputy Secretary of Labor, Alfredo Dominguez Maruffo, told the employers the government would not intervene. He advised the employers to negotiate. The workers put forward demands for a 20 percent immediate across-the-board increase in wages and a $1,600 (MX$32,000) one-time bonus, calling themselves the “20/32 Movement,” and pressured the SJOIIM to negotiate those terms. After weeks of individual factory negotiations, the workers’ demands were met, and a victory was achieved. Out of that struggle, a new independent union, the Sindicato Independiente de Trabajadores de Industrias y Servicios, Movimiento 20/32 (SNITIS) was formed; and SNITIS has gone on to organize several big factories, including Panasonic Automotive in Reynosa, and Tridonex in Matamoros.
AE: What does it mean to be an independent union in Mexico? In the United States, a union can be not affiliated to the AFL-CIO, but it can still have a board election, it can still have rights in court.
JH: In Mexico, an independent union is a union organized outside the corporatist relationship of the “official unions” (CTM, CROC, CROM, SNTE, et al.8) with the PRI political structure. In the 1960s and 1970s, as we were saying, political radicals began the formation of independent unions through direct action, and they were minimally successful. But unions affiliated with the existing confederations and political parties, first the PRI and then the PAN, used their position on the labor boards to refuse registering unions not affiliated with the CTM or other corporatist unions. Sixty years of corporatism have left their mark on workers and would-be independent trade unionists. Many instinctively look to the Mexican state as the principal determining factor in the success or failure of a trade union initiative, which leads them to try and align as closely as possible with the state and the party in power.
Most successful independent unions are in the private sector. Two of the earliest successful independent unions were the Volkswagen Union in Puebla and the Nissan Union in Morelos. Both of them are unions that bargain at the level of the company. To win recognition, they had to throw out an industrial auto workers union that was an affiliate of the CTM and part of the corporatist political structure. How did they succeed? Through direct action, through those wildcat strikes—illegal activities that the state tried but failed to repress.
AE: Did they go for contracts?
JH: Yes. Once Volkswagen saw that they couldn’t operate without recognizing the independent union, they agreed to make a deal. This happened in a number of sectors, including with some of the state-owned companies. Workers at Dina, a truck manufacturer in Hidalgo, also formed an independent union through direct action. This was the only way, because you couldn’t use the legal process to get recognition, and you had to force the employer into enough desperation to ask the government to allow the recognition of the union.
This situation continued through the nineties. When I came here in 2000 to represent the AFL-CIO Solidarity Center, we started supporting a group of about a thousand Mexican workers at a Nike contract factory here in Puebla. The Korean owner who produced sweatshirts for Nike had recognized one of these corporatist unions before the plant even opened. The workers were angry at being forced to pay dues to a corporatist union, the state CROC affiliate, that they had no contact with, and which never did anything for them. The workers formed an independent union and conducted a nine-month strike at this maquiladora. Because it was a Nike factory producing under license from the University of Wisconsin and other universities, there was pressure from the US—from the student activist groups such as United Students Against Sweatshops—to get their universities to cancel their licenses with Nike.9 Nike called me and asked me to help resolve the conflict.
AE: How many months into the strike did that happen?
JH: Almost at the beginning of the strike. The CROC state affiliate had got the state government to send in the riot cops to beat up the workers that had camped out in the factory yard, and so the workers all went to their homes and didn’t go to work. People stayed home, that was how the strike unfolded. Both Nike and the maquiladora were desperate.
The company—both Nike and the local contractor—saw me as an ally in their struggle for existence, and I helped them work out a resolution. But first the company had to pay off the incumbent union to the tune of $50,000, and then the contractor had to pay off the government. And of course, the union and government were related: when the Korean contractor wanted to make an investment in the state of Puebla, it was the governor of Puebla who introduced him to the CROC union.
“Mafia of power” is what López Obrador called it, and he was right. This issue of corruption got worse and worse from the late 1960s until Peña Nieto, the last president before Lopez Obrador, who was a pure object of popular contempt. He was blatantly corrupt, and the mass media sold this guy as a president. From 2012 to 2018, people were just so disgusted that they elected a radical, a rebel: López Obrador, whose main political platform was ending corruption and using the funds that were freed up to assist the poor. His slogan was “for the good of all, first the poor”—just the total opposite of the ideology that had preceded him. He has been tremendously successful, so much so that his successor, Claudia Sheinbaum, now has 85 percent popular support.
AE: Have there been efforts to federate, or to form a rival federation, to bring the militant parts of the labor movement to a broader level of organization?
JH: There have been attempts, but the independent union movement in Mexico is ideologically committed to enterprise unions, bargaining at the company level. Independent union leaders and members areextremely suspicious of larger organizations because of their experience with the corporatist federations and confederations. There is a federation of auto parts, aerospace, and tire workers that has ten affiliated unions, FESIIAAAN. But they have not registered as a federation legally. They have no staff, and no dues or affiliation fees. They rotate the president among the leaders of the independent unions every year.
AE: Have independent unions experienced setbacks because of that suspicion of federations? The impetus for broader organization, historically, is that the firms can be put against each other. The militant shop can be punished if it stands alone.
JH: This enterprise union mentality is a serious weakness. The Nissan Union is one of the original independent auto unions, formed in the 1970s at the Nissan plant in Cuernavaca, Morelos. The union negotiated excellent contracts; but in 1982, Nissan set up a plant in Aguascalientes, and since then has opened three more plants, all with a corporatist union, the CTM. That union basically discredited itself by not representing the workers, but the union that eventually challenged and took over the contract, Confederación Autónoma de Trabajadores y Empleados de México (CATEM), is led by Pedro Haces Barba, a former PRI and CTM leader. His patron, Ricardo Monreal, the former governor of Zacatecas, is also a former PRI man, who now sits in the Chamber of Deputies. Barba is trying to replicate that niche for himself within the new political regime of Morena, so the workers are no better off. But Morena has not shown significant support for this—both men have come under significant criticism from Morena’s more progressive figures. Meanwhile, Nissan has been downsizing the Morelos plant, where the independent union is organized, and increasing their production in Aguascalientes instead. The same happened with the VW independent union: VW built an engines plant in Silao and signed a CTM contract before the doors opened, which the independent VW union has not been able to overcome.
AE: How has the USMCA changed labor organizing?
JH: Unlike NAFTA, the USMCA has a labor chapter.10 One of its provisions required Mexico to reform its labor law and to ratify ILO Conventions 87 and 98, which the US has still not even ratified.11
In 2019, Mexico reformed its labor law to require direct, private secret ballot votes on union representation elections, union leadership elections, and ratification of contracts—a much more democratic system than exists in the US. The independent union movement and its allies—academics, labor lawyers, activists of all kinds—have been supporting this type of reform since the 1970s. Secret ballot was the key consideration, but the elimination of tripartite labor boards is also crucial. There is a new labor justice system under the judiciary, and now, because of a recent constitutional change, the judiciary is going to be democratically elected.
The USMCA labor chapter also has a Rapid Response Mechanism that permits workers or unions to raise complaints with the US Department of Labor if their rights are violated. The Mexican government currently has been responsive to this. Under Biden, the US had good labor secretaries and the US Trade Representative (USTR) was fairly progressive. The US pushed hard for the success of the labor terms of the USMCA, and there were twenty-four cases during the Biden administration that were favorably settled for Mexican workers and independent unions. This really is a huge transformation.
One of the first cases under the USMCA Rapid Response Mechanism was at General Motors in Silao, Guanajuato, an assembly plant of 6,500 workers that produces US$40,000 Silverado pickups for export to the US.Part of Mexico’s USMCA implementation stipulated that existing contracts had to be voted on by workers. When the incumbent CTM union at GM Silao was caught destroying ballots in the first vote, the Rapid Response Mechanism ensured a fair vote. After the contract was voted down, a new independent union, SINTTIA (Sindicato Independiente Nacional de Trabajadores y Trabajadoras de la Industria Automotriz), won a representation vote against two other unions. They’ve been negotiating good contracts ever since. SINTTIA, which has an industrial union outlook, has since won a couple of campaigns in auto parts plants, and they just organized a Bose speaker plant in Tijuana.
AE: Now that USMCA is being renegotiated, what do you think is the best way of improving on this record?
JH: First of all, the USMCA is asymmetric. Mexico is governed by these terms, not the US or Canada. That would be the first thing I would want to see changed. The USMCA is about trade, and the sanctions involve the elimination of the tariff exemption for violators’ products. How would you sanction a US firm? There would have to be a new sanctions regime.
AE: But doesn’t the US auto supply chain involve exports from US plants to Mexican assembly?
JH: Yes, but the provisions don’t currently apply to US firms. They’re meant to “hold Mexico accountable,” which was the position of the US labor movement in the negotiations. In the current process, private parties file complaints with the USTR and the International Labor Affairs Bureau at the US Department of Labor (DOL). These offices conduct a preliminary investigation using their labor attachés in Mexico, of which there are five, to see whether they find a prima facie case of an employer violating labor rights. The rights are under the Mexican labor law and the ILO conventions—which US workers do not have. Why shouldn’t the US reform our labor laws? Why shouldn’t the US ratify the ILO conventions?
If the USTR and DOL find a prima facie case, they ask the Mexican government to investigate. The Mexican government then has a very short period of time in which to see whether they agree with the findings of the US government. If they agree, then there’s a negotiation between the US government and the Mexican government for a remediation plan or for an action plan. This process has been successful in most cases.
But I think it will find diminishing success. The Mexican government is becoming less and less responsive, and they’re beginning to look for ways out of aggressive enforcement. Recently, they have been reaching agreements with the company that’s been charged before the remediation plan is fully worked out, trying to preempt an aggressive plan.
This is the Mexican strategy in the revision of the USMCA. They want symmetry. My suggestion would be a board composed of all three governments, with citizen participation, that hears complaints and applies the same basic ILO conventions to all three countries.
In Mexico, with or without the USMCA, there should be an independent labor movement that is aggressive, that organizes, that takes direct action, that uses the Mexican labor law—which is truly good—to increase the legitimate representation of workers in Mexico. For that to happen, there needs to be an investment in resources, and the Mexicans don’t have the resources needed. There’s no Congress of Industrial Organizations in Mexico, so I’ve been trying to convince US unions that they should provide support for the Mexican independent labor movement.
AE: How much money would be a good, initial investment on the growth of the Mexican labor movement. What unions could undertake this?
JH: The US Congress appropriated $180 million for the implementation of the USMCA, of which $150 million was for contractors of various sorts to assist the Mexican Department of Labor in training and developing the labor inspectors, the labor justice system—“capacity building.”
The last $30 million was supposed to go to the AFL-CIO Solidarity Center, which I worked for at the time. The money was appropriated and I developed a program that I had hoped would be successful in building a militant labor movement in Mexico. The US and Mexican economies have been increasingly integrated since the 1980s, and in this period the Mexican PRI and PAN governments encouraged a low-wage strategy to attract foreign investment. The wage gap with the US grew significantly. Improved labor rights and increasing wages in Mexico are one of the means of leveling the playing field and promoting fair trade, but for Mexican wages to rise the country needs the growth of an independent and democratic labor movement. It was approved by the Department of Labor, but with the suspension of foreign aid that money has been frozen.
But US union support for Mexican worker organizing and collective bargaining need not depend on US government funding, nor cost $30 million. In the 1930s in the USA, the CIO hired 100 organizers, and in the five years from 1935–1940 the labor movement gained 5 million members, doubling in size. In Mexico, where an organizer’s salary and expenses at current levels would cost around USD $30,000, a national industrial organizing campaign could be carried out for a few million dollars. With the relatively favorable labor laws and labor authorities, some financial support for organizers, shared industrial research, and strategic coordination of campaigns would have the potential to organize many thousands of workers and change the balance of power in the auto and other basic industries.
AE: Do you think that many workers could be organized?
JH: Definitely. In Puebla there’s a Volkswagen plant with 7,000 workers with an independent union. Within 20 miles of that plant alone there are 70,000 parts workers supplying its components. There’s an Audi plant there with another 30,000 parts workers. General Motors has a plant in Coahuila with 7,000 workers, surrounded by glass, tire, brake, clutch, and axle factories. They can all be organized with a little investment, good industry research, and use of existing US union relationships with the corporations. I believe that the mood is there. There is great discontent in the ranks of the Mexican working class, especially in the auto parts, tire, glass, and other basic industry sectors. We’ve had independent union victories in all those sectors, which indicates that with a little bit of investment and international union solidarity you can stimulate campaigns in other plants.
This week marks the sixty-first anniversary of the military coup in Brazil, coinciding with a time of great instability in the country’s liberal democracy. A few days ago, the Federal Supreme Court ordered Jair Bolsonaro to stand trial for attempting a coup during the 2022 elections, an event that for Brazilian progressive forces evoked memories of the terror under the dictatorship and renewed debates about the threat of authoritarianism today. To explore the meaning of these experiences in light of current events, Phenomenal World editor Hugo Fanton spoke to Frei Betto, an organizer whose social and political work helped facilitate the resistance to the Brazilian military dictatorship, and caused him to be twice imprisoned by that regime.
A Dominican friar and writer, Frei Betto took part in the creation of the ecclesial base communities (Communidades Ecclesial do Base, or base communities), a form of organization encouraged by the parts of the Catholic Church practicing liberation theology in Brazil during the Cold War. These groups met regularly in a specific area—slums, schools, factories, etc.—to combine biblical reading with a debate on the political and social reality they were experiencing. They became one of the main mechanisms of resistance to the dictatorship and the fight for democracy in Brazil.
Frei Betto is the author of a number of books based on the experience of community organizing during the dictatorship, including Letters from Prison and Baptism of Blood, a work exposing the military regime for its crimes against humanity.
At a time when authoritarian forces are advancing in Brazil and around the world, and with the number of arrests and deportations rapidly increasing in the US under Donald Trump, the processes of regime transition toward increasingly authoritarian methods are more relevant than they’ve been in decades—as are the struggles to ensure that the horrors experienced in Brazil are never repeated.
An interview with Frei Betto
Hugo fanton: April 1 marks the sixty-first anniversary of the military coup in Brazil. Could you put it into context?
FREI BETTO: After the Second World War, as the Allies succeeded in defeating Nazi-fascism, a wave of democratization led popular movements worldwide to organize and demand rights. In Brazil, Getúlio Vargas returned to power in 1950. He had ruled the country under a dictatorial regime for 15 years, but had granted great benefits to the working class and was therefore considered the “father of the poor.” Vargas was also the mother of the rich, but in this new government, at the beginning of the 1950s, the conservative sectors of Brazilian society plotted to overthrow him because they did not accept policies that promoted better living conditions for the working classes. This right-wing conspiracy led to Vargas’ suicide in 1954, and Brazil entered a period of great political instability.
At the beginning of the 1960s, Jânio Quadros was elected, which only deepened this instability, as he resigned seven months after being elected, thinking that there would be a large national mobilization to bring him back to the presidency with authoritarian powers. That didn’t happen. The vice-president, João Goulart, better known as Jango, took over.
In this period, the word that most defined Brazil was the adjective “new.” Bossa was nova, cinema was new, literature was new. Celso Furtado’s economy was new, everything was new. Brazil was experiencing its emancipation and a progressive turn, which granted more freedom to social movements such as the peasant leagues and the student movement. In short, it was an effervescent country with a lot of creativity, many achievements, and economic policies that were quite unexpected. All of this was dismantled by the military coup of April 1, 1964.
The Brazilian elite didn’t anticipate that the popular sectors would threaten the privileges and interests of the ruling classes by, for example, demanding land reform. Brazil is a country of continental dimensions and has never known land reform, unlike its neighbors Bolivia and Peru, to name just two examples. This threat to privileges led to several coups with support from the White House, which established civil-military dictatorships throughout Latin America. This happened in many countries on our continent, as part of the US campaign to contain communism. In Brazil, while João Goulart’s government had many progressive aspects, there was nothing communist about him. He was a democrat and even a landowner, but he was sensitive to popular demands. As a reaction to this agenda, the military, subsidized by and in coordination with the United States government, carried out a coup on April 1, 1964. They tore up the Brazilian Constitution and implemented a regime of terror that lasted twenty-one years, of which I was personally a victim.
HF: How did this affect your life at the time?
fb: I was arrested as a student leader for fifteen days in June 1964, a few months after the coup. Then, in 1969, while working as a Dominican friar, I was arrested again for my work in support of the resistance and the struggle to re-democratize the country. I remained in prison for four years, until 1973. That period was marked by a lot of cruelty, torture, and the disappearances of those who were fighting for another social system, in this case socialism, or for the mere re-democratization of their countries. And we saw the spread of military coups to Argentina, Uruguay, and Chile. This tragic period in Latin American history was all financed, bankrolled, and sponsored by the White House.
At the beginning of the dictatorship, some liberal and democratic leaders, such as Rubens Paiva, who is portrayed in the film Ainda Estou Aqui (I’m Still Here), thought that the coup would just be a period of rearrangement for the ruling classes, under the tutelage of the military. They didn’t think there would be torture, disappearances, shootings, or cruelty at such a scale, as is condensed in the work Brazil: Never Again.
But the dictatorship did take hold, and although different generals took turns as president, its character became increasingly violent, murderous, and genocidal. The situation became more dire after December 1968, when the regime passed Institutional Act No. 5, which many analysts call the coup within the coup, as it institutionalized extrajudicial killings and the suspension of civil rights. Things really escalated at that point, and democratic forces began to resist the military dictatorship, both by peaceful means and by armed means. Groups and parties began to arm themselves in order to confront the military power of the dictatorship. This led to a great deal of wear and tear on the military regime.
HF: What was the work of resistance like throughout the 1970s? What would you highlight in terms of this organizing—whether it was comprised of permanent, daily, or less habitual patterns of opposition—in the extremely unfavorable context of political arrests, torture, murders, and disappearances?
fb: There was a period when this resistance was clandestine, either peacefully or through armed struggle. But during the mid-1970s it took on the dimensions of a mass struggle through union strikes. The union movement, led by Lula, denounced the dictatorship’s economic policy—the so-called “miracle”—as false, a big lie to cover up the real dynamics of the economy. Large unions began to mobilize, bringing thousands of people onto the streets to demand labor rights. This progressively undermined the foundations of the dictatorship.
The positive consensus in Brazilian society that the military had saved the country from communism started to fade as people became increasingly aware of the regime’s atrocities. It was also very important that official trade unionism was opposed and replaced by grassroots mobilization.
Brazil has always had grassroots organizations. From the sixties onward, through the progressive sectors of the Catholic Church, we formed the base communities that gave birth to what is known today as liberation theology. These communities did not attract the attention of the dictatorship, which considered them just a religious phenomenon. Meetings would begin with a reading of the Bible from the perspective of the oppressed, through an embrace of Paulo Freire’s pedagogical method. Ignoring the base communities was a big mistake on the part of the military, as these meetings turned toward training militants for popular activist movements, for trade union mobilizations, and, later, for organizing new political parties.
Between the 1960s and 1970s, there was a great spread of progressive Catholicism in Brazil. Grassroots organizing extended through favelas and factories, generating a more combative opposition within trade unions then tied to the dictatorship. This organizing struggle opened the way for new political parties. Among them was the Workers’ Party led by Lula.
So this is the process that brought together popular forces and undermined the dictatorial regime. Its victories included the return of exiles and the establishment of new national associations for organizing the working classes, such as the Central Única dos Trabalhadores and the Movimento dos Trabalhadores Rurais Sem Terra.
Unfortunately this process, this progressive organizational accumulation, has been lost in recent years. The election of Bolsonaro points to a global phenomena of weakened progressive forces and a strengthening of rightward mobilizations.
Hf: To what do you attribute the new rise of authoritarianism?
fB: After democracy was won due to the social, economic, and political failure of the dictatorial regime, we thought Brazil would never have an autocratic government again. But the world situation is not always linear, and is rather cyclical. Today, in my opinion, we are experiencing a wave of authoritarianism with a strong Nazi accent. This is happening on every continent, and is further exacerbated by the election of Donald Trump in the United States, as he is openly and avowedly an autocrat. An old joke in Latin America is that there has never been a coup in the United States because there is no American embassy in Washington. This is no longer true. The threat is now real there too. Trump tried to stage a coup d’état, and fortunately he was defeated, but now he’s back in office with massive support from the US population.
This authoritarian bias is in vogue around the world, and is due to several factors. During the Cold War, there was bipolarity, with the capitalist countries hegemonized by the United States and the East by socialism in the Soviet Union and China. This created a certain balance of forces. I believe that the greatest achievement of socialism did not take place in any socialist country, but in Western Europe: the working classes won many of their rights, guaranteed by law, because the European bourgeoisie feared that the workers would embrace the path of socialism and communism. The welfare of the working class in Europe was never as solid as it was in this post-war period lasting until 1989.
With the fall of the Berlin Wall, the world elite tore off its mask. And with the change in the pattern of capitalist accumulation from production to speculation, these elites now have much more income and power. Today, we have a world dominated, on the one hand, by speculators and, on the other, by these Big Tech companies that produce nothing, but just process our knowledge and information, turning it into merchandise and also into a force for dominating consciousness.
So I think we are in a world in which consciences are experiencing a spiritual domestication. We’ve always talked about globalization and I’ve always criticized this expression: what really exists is globo-colonization, the colonization of the planet by a system of society that is capitalist; a hedonistic, consumerist system that turns human beings into merchandise because we’re not worth our intrinsic dignity, but rather the goods we own or don’t own. The more we possess material goods, the more we are welcomed into society. There is an accelerated process of domination, causing social ties to become increasingly frayed. Union, or party relations are increasingly atrophied. There’s a strong tendency for networks to lead to individualism, because associative ties are being eroded and, at the same time, narcissism is being accentuated. The logic of social media produces both narcissistic feedback and a great dependence on these Big Tech companies that don’t exist to facilitate our communication but to sell products.
Hf: Is there a parallel between Bolsonaro and the military coup in 1964, between today and what we experienced under the dictatorship?
fB: Yes, because Brazil, unlike Argentina, Chile, and Uruguay, has never punished its torturers and murderers. On the contrary, it has created an odd mechanism from a legal point of view, which is the reciprocal amnesty. Instead of being denounced, tried, and sentenced, the torturers and murderers were granted amnesty at the same time as those who fought against the dictatorship. This meant that the culture of the dictatorship remained warm in the barracks of the Army, Air Force, and Navy. And they consider the 1964 coup to be a breakthrough, a revolution, and not the establishment of a dictatorship. Bolsonaro is the son of this strongly Nazi-like military background, just like all those who, with him, attempted the failed coup of January 8, 2023.
But today, they can’t find support in the military institutions. I don’t see any possibility of a new coup as we had before. But while Bolsonaro is ineligible to run for office, I do see the possibility of his people winning the next election in 2026, including the office of the President of the Republic. The authoritarian threat is in place. I think we progressives have to step up our work, because the risk is there. There is a tendency in Brazilian society to support this Nazi-fascism that characterizes Bolsonarism. I think this is a very big risk. So we need to get back to grassroots work and master the digital networks. We’re very reactive, we’re not proactive on digital networks.
Hf: What impact does the Trump administration have on this situation?
Fb: Trump is going to rule autocratically, ignoring the laws, the judges, as seen in the deportation of Venezuelans to El Salvador. The question is how the US judicial system reacts, to what extent it has the strength to stop him. If the mechanisms of checks and balances aren’t activated, I think that, looking at today’s scenario, he won’t be in office in four years’ time. He can’t be a candidate, but he can invent a casuistry, a new amendment to the US Constitution that allows him to be a candidate again. It’s too early to make an assessment, but I predict an extremely autocratic government, on the edge of what would be a declared dictatorship.
But all this will depend a lot on the performance of his government. Already, in his two months in office, he is creating a great deal of disappointment. Sixty days in office, and his prestige is already going down the drain. The wear and tear is already too great. The most sensitive part of the human body—the pocket—is a source of tension in Brazil, the US, or anywhere else. What will be the government’s role in people’s well-being? Food, health, education, etc., or war, arrests, and deportations?
Across the world, parties governing amid the post-pandemic rise in prices have found themselves punished at the ballot box. The seeming ubiquity of this voter reflex, which has transcended the left-right divide, translates to a political cry for help: just do something. The question, though, is what to do. The answer to this question today is unusually constrained in historical terms: interest rate increases and public-sector austerity. The example of Javier Milei is a case in point: the Argentine president took office in December of 2023 amid triple digit inflation and slashed public spending. While inflation in the country has dropped in response, the country’s poverty rate has climbed to 50 percent.
But persistent and accelerating rising prices were not unusual during the decades after World War II, and how governments should understand their cause was a central problem of politics and economic theory. The newly created United Nations understood the stakes of inflation, and in 1948 established a commission to study the roots of rising prices in Latin America and the Caribbean. Amid the birth of a Latin American school of critical economics in the years after World War II, “structuralist” economists associated with the UN’s Economic Commission for Latin America and the Caribbean (Comisión Económica para América Latina or CEPAL), argued that inflation accompanied development occurring within an imbalanced system of global trade. “Monetarist” economists, associated with the International Monetary Fund (IMF), instead blamed inflation in developing South American countries on excessive monetary expansion and fiscal mismanagement. The diverging political implications of these two interpretations were stark, lending themselves to distinct policy programs which would shape the trajectory of the region.
Margarita Fajardo, professor of history at Sarah Lawrence College, examines CEPAL and its contributions to the knowledge and theory of inflation in her 2022 book The World That Latin America Created. Her current follow-up book project considers the history of inflation (alongside commodity regulations) and its importance to the transition to a neoliberal order in Latin America. For Phenomenal World, geographer Sammy Feldblum spoke with Fajardo to understand the hemispheric history of how inflation might be mobilized for a different sort of political-economic project. The following conversation has been edited for length and clarity.
An interview with Margarita Fajardo
sammy feldblum: One of the major themes of your book is institutional personalities: how institutions of knowledge production like CEPAL came to shape Latin American economics, including the interpretation of inflation.
What is CEPAL? How did the economists employed by CEPAL come to collect and analyze data in a different way from those working on macroeconomic theory in the US in the 1950s? And what historical circumstances gave rise to CEPAL’s critiques of the global economy and the economic science developed to explain it?
margarita fajardo: Although CEPAL became eventually known as a Latin Americanized institution, we must remember that it is a UN-affiliated body. That global aspect is often forgotten, but it’s important because it gives a sense of CEPAL’s potential resources, leverage, and ideological diffusion.
Intellectually, CEPAL is best known for a few key notions that are often packed together under the umbrella term of “dependency theory.” The main contribution of the cepalino understanding of development was to place development in the context of a global political economy of countries divided between center and periphery: the industrialized centers producing manufactured goods and the periphery producing raw materials for the world markets. That international division of labor gives rise to specific political economies, specific labor struggles, and specific monetary policies. These specificities are what cepalinos identify as the source of a long-term decline in the terms of trade, impeding Latin America’s development in the long run. Given that diagnosis, cepalinosproposed two different strategies: first, industrialization that substitutes those goods previously imported from the world’s economic centers, and second, international cooperation between those centers and peripheries to make trade fairer and more conducive to the economic development of the periphery.
The book tries to unpack the notion of “dependency” and give each of the ideas within that framework its time, place, and trajectory. It’s important to really understand the differences between these concepts—and the politics behind each of them—because they emerged during distinct periods. CEPAL is known for the center-periphery framework, the structuralist approach to inflation, and then dependency theory. The center-periphery framework was rooted in the post-World War II context. The structuralist approach to inflation, which I will explain in a moment, rose in the 1950s in relation to the politics of inflation in Chile and Brazil. Full-fledged dependency theory emerged in the mid 1960s and 1970s in response to the early theory of the center-periphery structure of world production and trade, and also in response to the changing political economy in Latin America, which was considering the role of international capital and of the political forces of development at the local, national, and global levels.
Institutions, individuals, and ideas—that is the tripod in which I conceptualize CEPAL and its role. In the book, I focus on individuals that shaped the trajectory of the institution, and also how the institution and the individuals clashed and altered each other’s trajectories. Those particular individuals include Argentinian Raúl Prebisch, long-time head of CEPAL and prime mover of the center-periphery framework. Then the “structuralist approach to inflation” connected many different cepalinos, including Mexican Juan Noyola, Brazilian Celso Furtado, and Chileans Anibal Pinto and Oswaldo Sunkel. Dependency theory brought in German-American Andre Gunder Frank and Brazilian Fernando Henrique Cardoso, just to name a few.
There are also those who participate in the dependency framework and are not linked to CEPAL. The confluence of these institutions, ideas, and individuals is what led to the rise and transformation of what I call the cepalino project.
sF: You note that the structuralist approach to inflation arose in the 1950s, but earlier, in the case of Chile for example, there was a policy of tolerance to inflation. Why and when does inflation come to be seen as a threat to economic development and social peace, and how does that figure into the initial period of cepalino thinking?
MF: The structuralist approach to inflation rescued and redeployed that foundational framework of CEPAL. Chile, the headquarters of CEPAL, greatly influenced the institution. The country had experienced long-term double-digit inflation, though not hyperinflation, for decades. In that context, inflation came to be assumed as the cost of development, or the accompaniment to growth. But there was a point in the 1950s when that consensus started to break. Why? Perhaps it has to do in part with the stagnation of development. When development and inflation coexisted, the latter was tolerated. But once development started faltering while inflation persisted, the search for new explanations for inflation began.
Cepalinos, like everyone else, initially thought of inflation as driven by costs: wages that increase above price levels that then are translated into prices. This creates a wage-price spiral that is transmitted to the rest of the economy. As development faltered and labor struggles over real wages intensified, some cepalinos worried that the wage-price spiral was not only unable to explain the rise in prices, but that it also fueled the fire of conservatives, who did not want to concede on those labor struggles by lowering profits or engaging in some form of redistribution. As cepalinos debated the sources of inflation in Chile among themselves, they were also thinking in relation to another big institutional actor in Latin America, the IMF. There, we can see the growing split between the structuralist and monetarist approach to inflation.
Cepalinos considered not only the amount of money in circulation, but also the structural factors affecting inflation, including the international economic structure, land tenure regimes, and balance between the different sectors of the domestic economy, among others. They argued that the international division of labor between raw-material producing peripheries and the industrial center—and the falling terms of trade for the former—made imported goods costlier, both hindering development and promoting rising prices. Similarly, the land tenure system, with its large, idle landholdings, made foodstuffs and agricultural products expensive or unavailable, turning countries towards imports amid a shortage of foreign exchange. As cepalinos debated the causes of inflation, they gave rise to the structuralist approach to inflation in the 1950s, which was eventually recast as the antithesis of the monetarist approach to inflation ascribed to the IMF.
sF: Can you elaborate more on these distinct approaches to inflation? What kind of policy program does each approach put forward?
MF: The structuralist approach tries to understand inflation as a product of development, meaning that the economic development in this postwar context was driven by demand for imported capital goods required for industrialization. This meant that development, the industrialization process, required imported capital goods which—given the shortage of foreign exchange and falling prices of exportable commodities—created inflationary pressures. This approach differentiates between the structural causes of inflation and inflationary pressures like wages.
The response required sustainable and accelerated development to break the bottlenecks that lead to inflation. If there’s not enough food, and food needs to be imported, then prices can rise. If we need to import capital goods, then we can either develop the capacities to manufacture goods ourselves, or we can create stable foreign exchange flows by stabilizing the prices of commodities to lower those inflationary pressures. The toolkit of the cepalinos, or the structuralists, sought to foment development through international cooperation in order to manage inflationary cycles. This would prevent the rapid adjustments in income required to control inflation, instead using international cooperation to soften those effects and have a less detrimental impact on the population.
The monetarist explanation of inflation has to do with the quantity of money available in the market, the source of which is private banks, the central bank, and the government treasury. The solution has to do with controlling that money supply: central bank regulations and cutting fiscal expenditure.
The structuralists think of inflation as a cost of development. The monetarists think inflation impedes development. Monetarists think that if the problem of inflation can be solved, then development will follow.
sF: How important is this split in driving the dependency theorists’ criticism of CEPAL more generally? I’m thinking specifically of the structuralist criticism of Raúl Prebisch’s stabilization plan in Argentina in the 1950s.
MF: Initially, the structuralist and monetarist approaches were not exclusionary paradigms. They could concede points to the other side. But over the course of stabilization plans in both Chile and Brazil, the political debates became heated. The paradigms of CEPAL and the IMF became more polarized. CEPAL was the “International Monetary Fund of the left,” a toolkit and institutional fulcrum to challenge the policies of the IMF. Certain cepalinos like Prebisch would say that such an oppositional approach would actually undermine an understanding of the true social costs of inflation.
The confrontation between structuralists and monetarists positioned cepalinos on the left of the polarized political contests in Latin America, especially as a result of the Cuban revolution. But also, while some cepalinos sided with the Cuban revolution, others trusted the Alliance for Progress, the US counterrevolutionary response to Cuba, as a solution for accelerating development. The alignment of CEPAL vis-a-vis the Cuban Revolution and the Alliance for Progress led to criticism from dependency theorists, who, in response, sought a different model. For some dependentistas, CEPAL’s institutional rupture with Cuba signaled that the organization was complicit with imperialist forces and thus an agent of underdevelopment.
sF: In 1970, Salvador Allende gave dependency theory-adjacent Pedro Vuskovic wide leeway to implement a program of economic planning in Chile. How does Vuskovic approach inflation while in power? How does the resulting high inflation under Allende spark backlash to the regime?
MF: I don’t know if Vuskovic would call himself a dependentista, but I do think he was very much influenced by dependista ideas, and he was a member of the Socialist Party. He implemented a plan to accelerate development through granting subsidies, raising wages, and promoting industrial growth. That push towards development initially worked.
There were many different factors at play, so it’s hard to tell in the Chilean case why exactly that approach failed. Did it have to do with sanctions, or domestic and international sabotage, or the failure of these policies in and of themselves? In any case, production didn’t increase at the pace of demand. That resulted in a shortage of goods which eventually translated into rising prices and the emergence of a black market. It was hyperinflation that marked the failure of the Allende project.
sF: In thinking about the struggle between the contrasting interpretations of inflation, Fernando Henrique Cardoso presents an interesting case. He was straightforwardly a dependency theorist and to the left of CEPAL in the 1970s. By the time he came into power in Brazil the ‘80s and ‘90s, he implemented stabilization plans that were part of a broader neoliberalization of the Brazilian economy. What does this say about the trajectory of dependency theory more broadly?
MF: The case of Fernando Henrique Cardoso, one of the pioneers of dependency theory, allows us to see how we move from state-led development to the neoliberal state and the neoliberal order. I think there’s some consistency in his transition despite the drastic change. His critique of dependency theory emerges from his critique of the developmental state, which he saw as a populist alliance between workers, industrialists, and the state. That critique persists as Brazil turns from a developmental state under authoritarianism to a developmental state under democracy. Throughout his career, Cardoso tries to understand and unravel the state as an economic actor—the role it should and shouldn’t play. These are the main questions of his intellectual and political project.
sF: Because dependency theory has an anti-imperialist ethos, it remains popular among Marxist intellectual historians and much of the left. Yet the world economy it describes has evolved considerably in terms of industrial structure and the international division of labor. What do you think about the accomplishments, limitations, and legacy of Latin American structuralism and dependency theory today?
MF: One of the meanings of dependency theory that has perpetuated over time is its ability to point to the insertion of Latin America in the global economy as the reason for many of the economic, social, and political difficulties that the region faced in the mid-twentieth century. That critique was embedded in cepalino thinking from the start. The contribution of dependency theory is interrogating the relationship between the global economy and the internal structures of power, and the balance between those different social actors. I think that dependency theory could be used again to identify those local forces, the internal political structures of power that work with external global forces to perpetuate or challenge a specific model of development.
While the world’s attention was focused on the United States presidential election that would deliver Donald Trump a decisive victory and a second Presidency, Brazil’s municipal elections in October were signalling the political balance for the coming years within the second largest country in the hemisphere. Elections for city council and mayoralties take place all on the same date, and—much like the Congressional midterms in the US context—are often read as an indication of the health of the ruling government’s support, and weigh heavily on intraparty disputes over strategy for incumbents and opposition alike. In São Paulo, Latin America’s largest city and Brazil’s largest single electorate, some trends asserted themselves: namely, the concerted success of centrist forces to defeat the favored candidate of the left, and the surprising rise of a non-Bolsonarista far-right candidate in Pablo Marçal.
To discuss the election results and Brazil’s current position on the global stage, PW editor Hugo Fanton spoke with political scientist André Singer. The wide-ranging interview addresses Singer’s recent writing on Brazilian party politics, class structure and political behavior, varieties of autocracy, and striking similarities between the United States and Brazil. Singer is Professor of Political Science at the University of São Paulo (USP), former spokesman for President Lula Inacio da Silva (2003–2007), and the author and editor of numerous books, including O segundo círculo: Centro e periferia em tempos de guerra,released in Brazil last September.
An interview with André Singer
Hugo Fanton: Pablo Marçal’s performance in São Paulo’s mayoral election drew nationwide attention. Who is Marçal, and what does his candidacy tell us about the Brazilian political scene, and the prospects for the 2026 presidential election?
André Singer: Pablo Marçal, an internet influencer, was completely unforeseen by the major political players. He came out of nowhere, backed by a political party that has no representative in the National Congress, and yet secured 1,700,000 votes. It was an extraordinary result in the most important electoral contest of the year: the city of São Paulo. By a difference of just 50,000 votes—a very small margin—he didn’t make it to the second round. In addition to the general shock, Marçal’s success exposed unforeseen issues on the right of the political spectrum: a young man, thirty-seven years old, with no support other than his own communication skills, was able to mobilize São Paulo’s far-right electorate away from former President Jair Bolsonaro. Marçal became a far-right figure, independent of Bolsonaro and his chosen candidate, the Brazilian Democratic Movement (MDB) candidate, as well as the city’s incumbent mayor, Ricardo Nunes.
In order to get re-elected, Nunes nominated a Bolsonaro appointee as deputy mayor, confirming that there was a formal alliance not only with Bolsonaro’s Liberal Party (Partido Liberal, or PL), but with Bolsonaro himself. Once Marçal began to climb in the polls, Bolsonaro found himself in a difficult situation. At first, he tried to disqualify Marçal in order to boost Nunes’s campaign. But this backfired, and Bolsonaro’s own supporters forced him to retreat and reconcile with Marçal. This shocking grassroots defection seriously threatened Nunes’s prospects.
In that moment, I believe, it became clear that the main winner of the entire 2024 electoral process was São Paulo state governor Tarcísio de Freitas. Tarcísio supported Nunes’ candidacy and was in debt to Bolsonaro, who made him his gubernatorial candidate in 2022 and delivered him a victory on the back of his strong base in the countryside. Now, two years later, in the middle of this situation, Tarcísio found himself faced with a decision: to stand with Nunes, or with Marçal and Bolsonaro. Tarcísio opted for the former, saving Nunes’s bid for re-election, which eventually caused Bolsonaro himself to retreat from supporting Marçal and take a more or less neutral stance. Tarcísio, despite opposing Bolsonaro and Marçal, asserted throughout that the former president needed to come back to Nunes—understanding that if the right unified, it would be competitive.
Tarcísio represents what I called “Shrek-like Bolsonarism” in a recent article for piaui: a right-wing politician that seems friendly in contrast with extreme figures like Bolsonaro and Marçal. He is a hybrid figure who is originally from the monstrous extreme right but presents himself in a more palatable way for the non-extreme right. Mayor Ricardo Nunes has the same profile. He does not appear as an extreme right-wing figure, but embraces several of their slogans and pursues unity across the right.
São Paulo’s municipal election was widely covered in the national media and can be viewed, relatively speaking, as a preview of elements that may return in the 2026 presidential elections. Of course, Brazil is different from São Paulo and there should be no automatic transposition. But some of what happened here may prove useful in understanding certain elements of 2026. The 2024 election demonstrated the power of the far right after its defeat in 2022. It was the first time that the far right returned to the polls, after Lula’s victory and Bolsonaro’s exile from the electoral system, and it proved to be powerful—not enough to win, but enough to compete. Crucially, it proved that if there is unity, the right can win the election.
HF: The parties that performed best in these municipal elections are called the partido do interior—parties of the interior, or rural areas in Brazil. These are parties like PMDB, PSD, and so on, which perform well in the local governments of the countryside and are closely associated with regional elites. What does their success reveal about the traditional right wing and the Bolsonaro coalition? Is there a realignment taking place?
AS: In 2006, I described an electoral realignment that had taken place through the election and government of the Workers’ Party (PT).1 That realignment was characterized by the decisive shift of the bottom of the social pyramid—households earning zero-to-two times the minimum monthly income—from the array of Brazilian parties and toward a strong alignment with Lula and the PT. This fundamental alignment is still intact. Datafolha’s assessment of Lula’s government at the beginning of October is an indicator of this: 36 percent of the electorate as a whole rate his government as “good and excellent.” But at the bottom of the pyramid, this proportion rises to 46 percent. For everyone else who isn’t at the bottom of the pyramid, it’s around 27 percent. That’s a big difference. It’s as if the country were divided into two blocs, two great social halves, with the bottom half supporting the government and the top half tending not to support it. Numbers like this lead me to believe that Lulism is still standing. Another element that points in this direction: the only major victory for the PT in the municipal elections was in Fortaleza, one of the main Northeastern capitals, which is the center of the subproletariat, that fraction of the class that is technically at the bottom of the pyramid. So, in that sense, the alignment from the early-2000s remains. What is new, however, is that there is a shift within the middle class from the point of view of party identification, which began with the depletion of the Brazilian Social Democratic Party (PSDB) and the migration of these sectors to the extreme right from 2016 onwards.2
One of the ongoing factors—which was also very apparent in the 2024 municipal election—is Bolsonaro’s attempt to build up a party to organize and replace the PSDB, and that is the PL. Bolsonaro first joined the Social Liberal Party (Partido Social Liberal), which he left while in office. Then he launched his own party, which was abandoned along the way and dissolved. Finally, he joined the Liberal Party which had been around for a long time, and whose top leader was willing to become the main organizer of Bolsonarism. Therefore, Bolsonarism now has a party vehicle that did well in the elections. It’s the party with the most state resources for campaigning, because it holds the largest caucus in the Chamber of Deputies, and it did very well in October.
However, this comes at a price: like any force that joins the institutional game for real, there is a normalization effect. Somehow, it is drawn into the implicit or explicit rules of the electoral game. The implicit rule in the Brazilian case is that these parties need to behave like what former President Fernando Henrique Cardoso, when he was just a political scientist forty years ago, called a partido ônibus, or “bus party”—meaning you can join and leave at any time, and the parties don’t necessarily have a homogenizing influence on their members, such that regional and local sections can bear very different characteristics. This “bus party” form leads to some very odd cases, like local alliances between the PL and the PT. It’s rare, but it has happened—just to give foreign readers an idea of the complexities of Brazilian party politics.
The PSDB was partly replaced by the PL, but also partly by the Social Democratic Party (PSD), which is led by a very traditional politician, Gilberto Kassab. In São Paulo state, especially in the countryside, the PSD has absorbed the old PSDB machine, a very strong structure in a very powerful state. As a result, we’re witnessing a reshuffling of the right of center. On the one hand, the extreme right has acquired a party apparatus with some robustness; while, on the other, there is the strengthening of a party from the so-called centrão—the large, ideologically thin, and highly transactional group of parties that make up the center of Brazilian politics. The PSD, a partido do interior, is a more moderate force that has grown in size with the potential to dominate the centrão. The right’s problem is whether it will be able to produce an alliance between the PSD and the PL. In the elections in São Paulo, the right and the far right were separated in the first round but combined in the second. The question is whether they can do this on the national stage in 2026.
So what uncertainties hang over the election next year? Firstly, whether Bolsonaro will insist on being a candidate, even though he is legally barred from running. There are several signs that he will run, and in this he would mirror what President Lula did in 2018 while facing a prison sentence for now-annulled corruption charges: he waited until the very last moment to acknowledge that he could not be an eligible candidate and nominated Fernando Haddad to run in his place. If Bolsonaro does this, it will create problems for alternative candidates. For example, if Tarcísio wants to run, he will need to build his name nationally, which requires mobilizing earlier rather than later. But to do so would mean stepping into the open and confronting Bolsonaro, thereby contradicting one of his premises: the right will lose if it is not unified. Tarcísio’s problem is this equation. The second major uncertainty is whether Marçal or a candidate like him would have a chance of reproducing, on a national level, what happened in the city of São Paulo. It’s a very difficult question, because Brazil is not São Paulo. Brazil is a giant, heterogenous country, with a wide range of different characteristics across region, religion, age, gender, and so on. But it’s not impossible, as demonstrated by the previous phenomena of Jânio Quadros, Fernando Collor, and Bolsonaro himself.
HF: Can you say more about the relationship between these shifting political forces and the country’s class structure?
AS: I’m going to start from the bottom up and talk about four population segments. First, there’s the base of the pyramid. As I said before, looking at this section shows that Lulism still stands. For example, one of the most significant victories in Brazil was that of João Campos (Brazilian Socialist Party, or PSB) in Recife, who was leading the coalition that supported Lula in 2022 and who was supported by Lula now in 2024. Recife is one of the largest cities in the poor region of the Northeast, and historically the home of many national political leaders. We’ve already talked about the PT’s victory in Fortaleza, also in the Northeast, and then there’s Eduardo Paes’s (PSD) triumph in Rio de Janeiro, where, with Lula’s support, the winning coalition inflicted a defeat against Bolsonaro in his political stronghold. This is no small feat, as Bolsonarism remains very strong in the South of the country, where it won in all three capitals, and obtained expressive victory in the Central-West, in addition to its performance in some capitals in the Northeast. Nevertheless, the election and the polls show that the base of the pyramid still remains with Lulism.
The second tier is what social scientists refer to as those with a monthly family income ranging from two to five times the minimum wage. Here, a sharp divide begins. Marçal’s candidacy in São Paulo had a significant advantage in this group, although it was not his core support, which was among higher-income voters. Support for the far right increases up the income ladder. It was the same with Bolsonaro: the higher the income in these middle sectors, the more they oppose the base of the pyramid. In this respect, it is a class opposition to Lulism. From a social point of view, this is the fundamental clash at play. Those earning from two to five minimum wages are very important from a numerical point of view, representing more than 30 percent of the Brazilian electorate, while over 40 percent of the electorate remains at the bottom at two times the monthly minimum or lower. These two segments decide the election, as rich Brazilians don’t have the numbers to be decisive. But the two to five wage sector is divided. The extreme right does hold sway there, but it remains under dispute, and I would even say that this is the sector that will decide the election in 2026.
Next, we have the third tier, made up of those with a monthly family income above five minimum wages. Here, too, there is a threefold split: the far right, the right, and a small middle-class progressive fringe. The left-wing candidate in São Paulo, PSOL’s Guilherme Boulos, who was backed by Lula, faced difficulties at the base of the pyramid, but his support grew in the third tier—somewhat similar to the distribution that the PT could achieve until its breakthrough in 2002.
Finally, the fourth tier would be the dominant classes, who don’t even feature in opinion polls. They are not important from a numerical standpoint, but from a class structure perspective. It’s clear that part of the ruling class supports the extreme right, particularly in the agribusiness sector. The PL, for example, did very well in the cities with the highest agribusiness revenues—where that sector determines employment and is politically integrated in local government. This is also true among those in business and construction, which are economically important sectors. The major question is what the cosmopolitan bourgeoisie will do, given that it was difficult to get them to side with Lula in 2022. The bankers, financiers, and cosmopolitan business elites backed Lula’s candidacy in an environment of considerable tension, and the subsequent two years in office have been marked by a central governmental dispute: the problem of austerity. This sector of the bourgeoisie wants public spending to be cut, ostensibly to create a fiscal balance that will generate peace of mind for investors. Their support for Lula is accordingly very fragile, so a right-wing candidate seemingly without extreme right-wing characteristics could emerge and appeal to this cosmopolitan bourgeoisie.
HF: You’ve written about the idea of “autocracy with a fascist bias” to understand the phenomena of Trump in the US and Bolsonaro in Brazil. Could you explain this idea, and how it helps us understand the election of a more radicalized Trumpist movement in the US, the Marçal phenomenon, and the impacts of Bolsonaro’s ineligibility?
AS: From an empirical perspective, what we saw during the Bolsonaro administration was a tendency toward an autocratic regime—in a specific sense, it aimed at consolidating governance around Bolsonaro himself. This is unlike, for example, what became known as the techno-bureaucratic military regime of 1964, which had no prominent leadership and instead organized around an apparatus. By “autocratic” I mean something very particular because, by contrast, we don’t have any empirical evidence to say that he was moving towards a fascist-type regime. The fascist bias lies in having activated, or perhaps having sought to activate, the unconscious of the masses. Following the Frankfurt School’s analysis of historical fascism, communication that can activate this unconscious across class divisions are part of the “delusional system” of right-wing nationalist and fascist politics. There are many episodes of this kind of irrational, mass, communications-driven far-right movement in recent history. To give one example, in 2021 Bolsonaro’s networks started spreading the word that most of the Supreme Court (STF) ministers were receiving Chinese money to enable the legal rehabilitation of former president Lula and thereby enslave the Brazilian people to China. This was spread not as a metaphor, but as a fact. And this fact is completely delusional, outside of the realm of logical dialogue. This didn’t exist in Brazilian politics until Bolsonaro came along. It’s a novelty that typifies what I call the fascist bias.
My analysis is for Brazil, but since the question has been posed, I’m risking an opinion on the United States. From a distance it seems to me that Trump’s victory last November took place amid an intensification of this fascist bias. The promise to deport millions of people and fables about Haitian migrants eating pets in the middle of the country take part in this delusional system. This newfound phenomena presents us with challenges we aren’t accustomed to in political analysis, so it’s difficult to predict what will happen when Trump takes office, but I would expect a further deepening of both authoritarianism and this fascist bias.
Back to Brazil, it’s my view that the fascist bias was fully at play in Marçal’s campaign in the São Paulo election. It was an extremely aggressive candidacy, characterized by vicious attacks on other candidates, and viral falsehoods. He was so offensive and provocative that, in a televised debate during the campaign, another candidate hit Marçal with a chair. The scandal became known as cadeirada, roughly meaning “chairing.” In a subsequent debate, one of Marçal’s advisors punched another candidate’s publicist. Generally perceived as random explosive moments, these events were rather, in my opinion, part of a communication strategy: acts of expressive violence that activate the unconscious of the masses. That’s why the Marçal phenomenon is very significant—it represents the existence of a social environment for this type of politics.
HF: You launched a book last September, The Second Circle (O segundo circulo), which seeks to place Brazil in the world. Where does the country stand today compared to the early 2000s? How do you view Brazil in the context of increasing competition between China and the US?
AS: As a peripheral country, Brazil is subject to determinations coming from the center of the global system, but at the same time it processes these determinations through its domestic dynamics and class structure. As Professor Fernando Rugitsky has argued, Brazil’s position in the global trade system is primarily as a supplier of roughly processed raw materials for industrial use in Asia. Brazil is once again the breadbasket of the world—or a part of the world, at least. Meanwhile, the third corner of this triangle, the United States and Europe, dominate the financial and currency system in which Brazil is a subordinate party. What we don’t know is whether or not the polarization between the US and China will lead to Chinese and US-European industrial investment in Brazil. So far, there have been some Chinese industrial investments in the country, such as the BYD and Goldwind plants in Camaçari (both of which used to house American industrial giants, Ford and GE). These investments do not seem to be on a scale that would suggest structural change or a reversal of the trend towards deindustrialization. Nor, so far, have I heard about the transfer of advanced technology, which is essential if we are to think about the possibility of reversing this trend. The same question applies to the bloc led by the US in opposition to China, because Brazil, as an important country on the international stage—diplomatically and economically—could benefit from this division by negotiating concessions from both sides that point in the direction of what is a historical project for part of Brazilian society, which is to seek a definitive exit from so-called economic backwardness.
Compared to the early 2000s, when Lula won the first presidential election, Brazil is significantly more deindustrialized and reprimarized. This partly explains the reason why the Bolsonaro coalition was defeated in 2022 by a margin of less than 1 percent of the vote, despite the humanitarian catastrophe that was Bolsonaro’s management of Covid-19. There is also the further transformation of a country toward services rather than industry, something that has everything to do with Bolsonarism, which brings together ruling class groups linked to agribusiness and services. So today, from the standpoint of a development project, the situation is far more difficult than it was twenty years ago. Precarious work, superexploitation of the workforce, the progressive growth of organized crime—these are the trends from the point of view of income redistribution and the lower classes. The problem of how to organize a new program in this situation is, I would say, one of the most distressing questions of the moment.
HF: You write in this book about parallels between Brazil and the United States, about a “mimicry” across the politics of the two countries. Can you outline the main aspects of this parallelism and its implications for understanding Brazil in the world?
AS: We started with the observation that, since 2016, Brazilian politics has begun to resemble American politics. At the first level, former president Jair Bolsonaro began to literally copy all of Trump’s actions, culminating in the uprising of January 8, 2023, in which a Brazilian crowd invaded and vandalized the headquarters of all three branches of government in Brasilia—mimicking January 6, 2021 in Washington DC. This was a kind of mimetic performance, with extraordinary consequences, because many of these people are in prison to this day, paying a very high price for the delusional rallying cry that led them there.
The philosopher Roberto Mangabeira Unger says that there is no country in the world more like the United States than Brazil: the extent of the isolation of the two countries, both continental in size, both inward-looking and insolated. It is worth remembering that Brazil also has a historical tradition of turning its back on the rest of Latin America, and looking first to Europe and then to the United States. It is also the case that Brazil has historically copied other US formulas, notably the adoption of presidentialism (although this is true for several other countries in the region as well). But finally, and perhaps most essentially for our discussion, both countries have been deindustrializing in parallel.
Of course, the United States is the center of the system and Brazil is a peripheral country—the starting points are different, and the place of the two countries in productive and financial chains are different. But, curiously, both countries have been experiencing parallel consequences for neglecting domestic industry. Deindustrialization is the starting point for thinking about the strange underlying resonances in the political realm, despite immense differences in social composition, political system, and so on.
HF: What are the prospects for Lulism and left-wing politics in Brazil?
AS: Contextually speaking, I see three major challenges. The first is the fact that budget cuts in programs that provide income and benefits to the base of the pyramid could have a fatal effect on Lulism, which is built entirely on the provision of this support. Possible cuts in the minimum wage, in the Continuous Benefit Program, in salary bonuses, which affect the base of the pyramid directly, need to be carefully observed from a political standpoint. Secondly, there is a perception, common to both the United States and Brazil, that the increase in the cost of living is impacting the base of the pyramid and also the next tier up (the two to five minimum wage monthly family income group), meaning that aggregate economic figures seem to be of little importance on the scale of elections. We may observe economic growth, a drop in unemployment, and an increase in wages, but when surveys are carried out, pessimism about the economy even increases, which seems to suggest that, for ordinary people, life is still very difficult. And this may have something to do with the surge in inflation in the cost of living worldwide, due to the disruption of production chains during the Covid-19 pandemic and perhaps later the wars, as oil and energy prices have a huge impact on the entire price chain and, in particular, on the cost of living. So the second challenge is to design policies to protect the popular economy, to prevent the effects of the global economy from reaching the lower income strata. The third, and most difficult, is to draw up a program that makes it possible to attract this group of voters who receive between two and five minimum wages monthly, who are not at the bottom of the pyramid, but who are workers dealing with precarious incomes and all that come along with them. For example, an app delivery driver who works on a motorcycle in the city of São Paulo is not at the bottom of the pyramid—in the Brazilian case, he is in the middle sector and not among the poorest. What project can fight for this electorate, which has proven quite inclined to support Marçal in São Paulo? It can’t be anything other than a national development plan. But how can we think of a development plan in the adverse global conditions I described earlier? To end on an ironic note, I would say that we need to do this now. But how? I don’t know.
HF: In the first chapter of the book, you defend the use of the word “interregnum” to think about the global crisis. Could you comment on the analytical value of thinking in these terms?
AS: The purpose of the article is to reflect on the notion that interregnum, for Gramsci, means a period of struggle between forces that don’t have hegemony, but seek it. It’s not just the idea that chaotic periods lead to a new settlement. We take a very political angle of looking at the interregnum as a period of dispute between these forces. From our vantage point, we sought to interpret the Biden phenomenon as an attempt to create a new, organizing vision of Americanism. It’s not clear to me that all of these attempts have been lost with the electoral defeat, but it will now be replaced by Trumpism, seeking to put forward a counter-direction to resolve the same set of problems. For example, there are a number of analyses that point to the very difficult living conditions of the average American citizen, not to mention citizens at the very bottom of the US’s own class pyramid. How will Trump deal with this? In global terms, the competition over the new hegemony is taking place in two directions—inwardly and outwardly. For Biden, this was attempting new domestic economic policy while pursuing belligerent foreign policy. When it comes to China, the focus must be on what it is proposing for the global South, and at the same time, for its own domestic economy. Thinking about the “interregnum” is about focusing on the direction of these forces, in a moment when there is no defined hegemony.
This interview was translated from Portuguese to English by Marina Vello.
Since 1999, the European Union (EU) and Mercosur have been negotiating a bi-regional partnership agreement comprising three pillars: trade, cooperation, and political dialogue. A quarter century later, in December 2024, the parties announced the conclusion of negotiations during the Mercosur Summit in Montevideo, attended by European Commission President Ursula von der Leyen. Before implementation, the agreement will undergo legal scrubbing for national ratification processes. The European Union has opted for a split approval: the trade dimension of the agreement requires only European Parliament approval, while political and cooperation aspects must be submitted to national parliaments. Within Mercosur, though each country’s parliament must ratify the text, the agreement can take effect bilaterally between the EU and individually approving Mercosur nations.
A previous version of the deal was announced in 2019, under the Mercosur leadership of Jair Bolsonaro. Latin America abandoned those negotiations after the EU introduced new environmental regulations. While Bolsonaro opposed these measures, they were also widely viewed throughout Mercosur, including by progressive factions, as protectionist on the part of the Europeans. Negotiations resumed in 2023 with Lula’s new term. Although more moderate, the new text still faces criticism from organizations and governments on both sides of the Atlantic.
In the European Union, resistance comes primarily from agricultural sectors in France, the Netherlands, and Poland, which fear competition with Mercosur’s producers. In South America, concerns arise mainly from civil society and academia, centered on the agreement’s potential to undermine current reindustrialization efforts within Mercosur countries, reinforcing their export profiles focused on primary goods. Compared to 2019, the current version maintains greater freedom for the national implementation of public policies and public procurement requirements, enhanced environmental commitments, new review and “rebalancing mechanisms” in the case of disputes, and extended deadlines for trade liberalization or tariff removal in certain sectors.
Phenomenal World’s senior editor Maria Fernanda Sikorski spoke with Marta Castilho, professor of economics at the Federal University of Rio de Janeiro and coordinator of the Research Group on Industry and Competitiveness (GIC-UFRJ), about the agreement’s perspectives for Mercosur—and Brazil, in particular—and the risks of trade liberalization for South America’s national and regional development. The conversation has been edited for length and clarity.
An interview with Marta Castilho
Maria Sikorski: Could you describe how the political and economic environment evolved during the partnership’s negotiation period, from 1999 until its conclusion in 2024? Why did the agreement remain relevant, and how did EU-Mercosur trade relationships change during this time?
Marta Castilho: When negotiations began, the European Union was a bloc of fifteen member states. Mercosur had aimed to gain preferential access to the European Union over Eastern Europe, which then had industrial structures relatively similar to ours. Eastern Europe, however, eventually became closely integrated with Western European industry. This might have been the most significant change since negotiations began, at which time the horizon was a little more encouraging to our industry.
Since the beginning, Mercosur saw an opportunity to increase exports of agricultural products. Domestically, the agreement was supported by interests linked to agribusiness, while industrial sectors took a more cautious approach, advocating for a gradual trade opening as they feared increased competition from European manufacturing.
Additionally, it was important to consider that European companies maintained a strong presence in the region through multinational subsidiaries, and their positions had, let’s say, “mood swings” throughout negotiations. For example, one of the world’s largest poultry producers, a French company with operations here in Brazil, initially supported trade liberalization because their aim was to raise chickens in Mercosur and export the meat to Europe. This is in contrast with current objections coming from France. Similar shifts occurred across various sectors. The automotive sector is another significant example, as is the chemical sector and its various subsectors, due to the strong presence of European companies in our region. In general, Europe showed great interest in opening Mercosur’s industrial products market and facilitating service flows. In contrast, there was stronger resistance to agricultural product imports.
MS: An earlier version of the agreement announced in 2019 never received European Parliament ratification. What are the main changes in the current text?
MC: One relevant factor is that in the five years between 2019 and 2024 the Covid-19 pandemic happened. By 2019, European countries were already signaling a return to industrial policies, with new strategies focused on “Industry 4.0,” digitalization, and related areas. The pandemic exposed some of these countries’ vulnerabilities, leading them to explicitly adopt policies targeting localized production and reducing foreign dependency in specific sectors and segments. This shifted the EU’s trade interests in the agreement and the overall negotiating conditions between the blocs.
The shift particularly affected the interest in minerals, especially critical minerals. Mercosur is extremely rich in mineral sources—in this regard it is a paradise. One of the most recent shifts is Europe’s increasing attraction to the region’s minerals. The EU has taken a dim view of any initiative inside Mercosur countries to protect or tax these mineral exports, but Mercosur has been strategic about the critical minerals sector, ensuring the possibility of imposing conditionalities.
In Brazil, there is an ongoing debate about this matter. The discussion is not closed, and perspectives vary, for example, between the government of the State of Minas Gerais and parts of the Federal government. The discussion centers on developing a strategy for critical minerals beyond its exploitation and export as raw material, to focus on increasing processing capacity and, ultimately, manufacturing batteries and other goods domestically.
Another change between the 2019 and 2024 texts concerns public procurement. Mercosur secured the right to use this mechanism as a productive development policy. While Europe has long employed public procurement, the 2019 agreement eliminated the possibility of Mercosur using certain mechanisms. Mercosur managed to renegotiate this, bringing the agreement’s terms much closer to the bloc’s existing rules. This was one of the most positive aspects of the renegotiation.
MS: What are the implications of separating the agreement’s trade, political, and cooperation pillars, given that trade provisions take effect after the approval of European Parliament and Mercosur national parliaments, while political and cooperation clauses require approval from each EU national parliament?
MC: The partnership agreement follows a European tradition of handling non-trade aspects in negotiations of this nature, unlike the Anglo-Saxon tradition, for example. This is the reason why the EU-Mercosur agreement has a trade component, a cooperation component, and one for political dialogue. This is a positive aspect of the agreement because, for example, cooperation provisions could compensate for certain trade-related losses. Trade opening can be compensated by prospects for cooperation in technical development in areas in which Europeans are more advanced, such as technology, and in fields where we can exchange, like bioeconomy and tropical medicine.
Now, for pragmatic and strategic reasons, the agreement has been split up. This is because a trade agreement is easier to negotiate and approve. The procedure, even within the EU, is faster: if it’s just the trade portion, it doesn’t require approval from all member-state parliaments but only the European Parliament. A comprehensive partnership agreement would need to go through all national bodies—a process that could be delayed by the disagreements we’ve seen in France, Poland, and the Netherlands, for example. For the Europeans, it’s a pragmatic matter. But for Mercosur, in my view, it’s short-sighted, as the bloc misses the opportunity to benefit from potential gains that would be made possible by other aspects of the agreement, especially cooperation.
MS: Because it is possible that only the trade agreement obtains approval while other pillars remain indefinitely postponed.
MC: Precisely, because there is no incentive to approve. You won’t put to a vote something you know won’t be approved. European interests are already covered by the trade agreement. For example, some environmental rules added to the current text—such as the Carbon Border Adjustment Mechanism (CBAM) for disputes and the reforestation mechanism—do not affect the main European legislation: they are exempt from the trade agreement.
MS: Let’s discuss the trade agreement’s key aspects and their impact on different Mercosur sectors. Can we start with the part about tariffs and tariff rate quotas?
MC: The trade agreement covers various regulatory domains. One of them is tariffs and tariff-rate quotas—quotas are technically non-tariff barriers, but they are typically addressed together. The quotas are largely used for agricultural products: a lower tariff is applied for a certain amount of exports within the agreement, and anything exceeding this quota is charged with standard partner-country rates. Mercosur countries adopt a common tariff for agricultural products. The current agreement maintains an array of tariff-rate quotas from the 2019 text. Certain products see increased quotas and reduced in-quota tariffs. In other situations, the in-quota tariffs were reduced, but the established quota is lower than the amount we were already exporting in 2019 and 2020. Moreover, there are mechanisms which allow Europeans to review these quantities—another preserved aspect of the 2019 text. While Mercosur may gain improved access to the EU agricultural market, trade liberalization is not as impactful as some sectors hope or proclaim.
MS: Considering the volume of our current exports?
MC: Exactly. But some segments will benefit. Take beef producers, for example—it’s no surprise that French farmers are highly reluctant, as beef is one of the products receiving expanded quotas and reduced tariffs. Rice was one of the products for which both quotas and tariffs on imports into Europe were reduced. There are various situations among agricultural products.
MS: What about Mercosur’s industrial goods?
MC: That’s our biggest problem, for several reasons. European tariffs on industrial goods are already quite low: in general, they average around 5 percent, while ours will settle near 13 percent. Potential tariff reductions by the Europeans on our exports there are modest and Europe’s existing trade agreements with other countries further limit our preferential margin. On top of that, there’s a significant asymmetry, both in terms of competitiveness and scale of our industrial sectors. While we lack the competitive advantage to significantly penetrate European markets, their potential gains from trade liberalization are much greater.
MS: The general perception in critical assessments of the agreement suggests that Mercosur’s agribusiness would benefit significantly while industry would struggle. But from what you are saying, the agricultural sector doesn’t necessarily gain that much, except in specific products.
Given this scenario, what implementation conditions would help South American industry benefit, or at least mitigate negative impacts of competition with European industry?
MC: The trade and tariff liberalization is already set and will likely be implemented. What this means is that, in trade terms, there’s little to be done. On the one hand, we need to enhance domestic industry productivity and competitiveness—and that’s our own responsibility, which involves conceiving industrial and productive development policies, making strategic use of public procurement, and implementing technological policies. On the other hand, we can also make use of certain adjustment mechanisms within the agreement, such as the rebalancing mechanism. The revised text added certain safeguard mechanisms against occasional surges of products and abrupt inflows in specific sectors. While specific instruments await definition, at least the deal preserves adaptation possibilities.
Nevertheless, competition between our industrial production and Europe’s remains inevitable. What we can do is leverage available domestic tools to enhance our industrial competitiveness, while utilizing both national and agreement-based trade mechanisms.
MS: Tariffs represent a crucial tool for protecting and strengthening domestic industry in order to become competitive, especially for countries like those in South America. Doesn’t an EU trade agreement of this nature undermine efforts toward reindustrialization in the region?
European companies enjoy technological and productive superiority, better credit access, and stronger state support. Brazilian companies, conversely, face extremely high interest rates, scarce credit, currency instability, and logistical and infrastructure challenges. Aren’t we giving up a crucial industrial policy tool? Could this agreement reinforce Brazil’s trend of returning to a primary-export-based economy as has taken shape in recent decades?
MC: Absolutely. The agreement impacts it in both short and long-term. Short-term effects stem from tariff reductions. Even though the timeline for vehicle tariff reductions was extended, particularly for those with new technologies— the tariff reduction schedule for electric vehicles, for example, could extend up to 30 years—the current version doesn’t seek to revise the tariff reduction promised in 2019. We gave up on an instrument that could strengthen domestic industry in relation to a stronger trade partner, further complicating reindustrialization efforts.
Beyond tariffs, other crucial domains include public procurement, questions related to intellectual property, and so on. Securing public procurement mechanisms represents a significant achievement for Mercosur, and it’s worth noting that this is a hallmark of the current Brazilian government in the text. They insisted on this point, and now we will explicitly use it—just as developed countries do. This mechanism is particularly interesting, because it not only enables state support for specific sectors through preference margins and conditionalities but also helps to prompt certain practices—for example, requiring public procurement to be sustainable encourages suppliers to adopt sustainable practices. This applies both to domestic and foreign companies: if an international company wants to become a government supplier, it could, for example, face technology-transfer requirements.1
As for the intellectual property section, I get the impression that there haven’t been significant progress or reversals compared to 2019, which established slightly stronger commitments than those already made by WTO countries, but not much more than that.
Compared to previous versions, it seems that until around 2013 or 2014, the Brazilian government approached negotiations with a clear strategic vision centered on productive development and autonomy. That continuously shifted until 2019. While we might see some improvements now, the text retains several elements negotiated under a strongly liberal framework. The trade chapter, for example, has remained largely untouched.
MS: How might the agreement impact Brazil’s reindustrialization efforts?
MC: The trade part of the agreement undermines reindustrialization efforts targeting a more technologically dynamic and autonomous productive development. While some domains—such as public procurement and certain safeguards and rebalancing mechanisms—represent progress compared to 2019, they are insufficient.
Brazil’s large consumer market and position as South America’s export platform demand special consideration. So, it’s the Brazilian government’s role to try to impose conditionalities to compensate agreement-related losses. The mining sector offers a prime example. The government can potentially intervene in the conditions of mineral exploitation within national territory. There’s some room for negotiation with investors—for instance, by stipulating that certain advantages can only be accessed if more production stages occur domestically. However, this will depend on the domestic management of industrial, technological, fiscal, and tax policy instruments. It will also hinge on macroeconomic conditions, including growth potential and interest rate dynamics.
Moreover, it is important that the Brazilian government shares its advantages with other Mercosur countries. The problem with this agreement is that it tends to reinforce a pattern of growing regressive specialization, which has intensified since the 2000s across Brazil and the region. Comparing Brazilian exports to the EU in 2003, 2013, and 2023 reveals the increasingly primary nature of our exports profile. And the agreement tends to reinforce our specialization in agricultural and mineral products.
Order
2003
2013
2023
1
Soybeans, whether or not ground
Iron ores and concentrates, including roasted iron pyrites
Petroleum oils and oils obtained from bituminous minerals, crude
2
Soybean oilcake and other solid residues from soybean oil extraction
Soybean oilcake and other solid residues from soybean oil extraction
Soybean oilcake and other solid residues from soybean oil extraction
3
Iron ores and concentrates, including roasted iron pyrites
Soybeans, whether or not ground
Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion
4
Fruit juices (including grape must) and vegetable juices, unfermented, not containing added spirit, whether or not containing added sugar or other sweetening matter
Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion
Soybeans, whether or not ground
5
Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion
Chemical wood pulp, soda or sulfate, other than dissolving grades
Copper ores and concentrates
6
Chemical wood pulp, soda or sulfate, other than dissolving grades
Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils
Iron ores and concentrates, including roasted iron pyrites
7
Meat and edible offal, of the poultry of heading 0105, fresh, chilled or frozen
Petroleum oils and oils obtained from bituminous minerals, crude
Chemical wood pulp, soda or sulfate, other than dissolving grades
8
Unwrought aluminum
Fruit juices (including grape must) and vegetable juices, unfermented, not containing added spirit, whether or not containing added sugar or other sweetening matter
Fruit juices (including grape must) and vegetable juices, unfermented, not containing added spirit, whether or not containing added sugar or other sweetening matter
9
Petroleum oils and oils obtained from bituminous minerals, crude
Unmanufactured tobacco; tobacco refuse
Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils
10
Unmanufactured tobacco; tobacco refuse
Copper ores and concentrates
Ferro-alloys
Thus, strengthening regional industrial coordination within Mercosur becomes crucial. Despite obvious political challenges, the existing coordination in certain sectors should not only be preserved but further reinforced—including through public procurement mechanisms or regional funds, enabling the bloc to enter more cohesively in this EU “partnership.” The Uruguayan government, for example, is delighted with the agreement—particularly because the liberal government that took part in the negotiations was fond of the specialization.2 Their beef exports do not face the same environmental problems as Brazilian production in the Amazon and Cerrado regions. For Brazil to maximize agreement benefits, coordinating with its neighbors and creating strategies to transfer part of the gains is desirable, as it could facilitate alliances with these countries and boost bloc-wide industrial production.
MS: The Brazilian government’s official position claims the agreement offers several advantages to Mercosur. The Ministry of Development, Industry, Trade and Services, for example, highlights greater access to the European market—which could attract additional foreign direct investment—and reduced domestic costs for industrial inputs and capital goods—since we could import them duty-free. Improved international competitiveness of our products is the ostensible result. They argue this would strengthen trade partnership diversification, industrial modernization, integration with EU production chains, and spark interest from other actors in negotiating new agreements with Mercosur to access this market. How do you view this argument?
MC: This is a very old argument on trade liberalization. It is the same one used in the 1990s, claiming that we can import to export, that liberalizing imports might provide productivity gains through the import of cheaper inputs and capital goods. This would allegedly lead to competitiveness gains for the domestic industry, turning the country into an exporter of manufactured goods. However, since then, Brazil and the region have increasingly exported less sophisticated goods. In short, our major liberalization attempt implemented in the 1990s provided no evidence of the positive effects of trade opening on exports.
I doubt that this time the Brazilian economy will achieve a great virtuous cycle of economic growth driven by direct investment or increased export competitiveness through greater access to European inputs, particularly in the current context. Will we integrate into European value chains? No, we won’t. Europe has already established its chains and is attempting to shield itself from Chinese and other Asian countries’ entry, trying to consolidate these chains as much as possible within European borders. Our role will likely be further specializing in raw materials supply for these chains. The foreign investment we might attract relates to companies looking to take advantage of specific domestic factors, such as natural resources and a broad regional consumer market. But this does not necessarily translate to industrial modernization.
This article was translated from Portuguese to English by Glenda Vicenzi.
The ideas of the Jamaican political leader Michael Manley had a global impact that continues to be felt today. As the leader of the People’s National Party (PNP) from 1969 to 1992, and particularly in his first period as prime minister of Jamaica from 1972 to 1980, Manley promoted a wide range of ambitious reforms that were guided by strongly articulated ideas of democratic socialism and economic decolonization. He recognized that Jamaica, like many other countries, had gained constitutional independence, yet remained wedded to a world economy structured by colonialism.
Manley therefore sought to pursue these ideas on an international level. Along with other leaders such as Tanzania’s Julius Nyerere, as one of the leading spokespeople in the 1970s for a New International Economic Order (NIEO) based on more egalitarian principles through cooperation among countries in the global South. Despite the successful implementation of many reforms, Manley’s policies faced strong opposition both from groups within Jamaica and from international actors, most notably the United States. His government struggled with the difficult economic circumstances of the 1970s, and lost elections in 1980 after several years of austerity that came as a condition for loans by the International Monetary Fund (IMF).
Anthony Bogues is the Asa Messer Professor of Humanities and Africana Studies at Brown University. He has written extensively on Caribbean and African intellectual, cultural and literary history and political thought, including the life and political ideas of Michael Manley. In the late 1980’s he was also an advisor to Manley. More recently, he has supported efforts to rethink the political vision of the People’s National Party.
In this interview, Bogues reflects on the life and legacy of Michael Manley, whose hundredth year birth anniversary was celebrated last month. Considering Manley’s influence in both Jamaican and internationalist politics, the conversation explores Manley’s political formation in the Jamaican labour movement, his ambitious efforts to decolonize the Jamaican economy, as well his efforts on the global stage, on issues ranging from the US embargo of Cuba to the IMF. Bogues discusses inheriting a generational burden to rethink the philosophical vision of democratic socialism in Jamaica, expressing hope for a united Caribbean.
An interview with Professor Anthony Bogues
will kendall: Can you tell us about your relationship with Michael Manley? How did you first meet him, and how did your relationship develop?
anthony bogues: I met him formally after the 1980 election, which was a critical moment in Jamaican history. The year of the election was a period of political crisis and immense violence—over 800 people died between the beginning of the year and the election in October. From the late 1970s onwards I was a left-leaning journalist working at the Jamaican Broadcasting Corporation. The election was in October, and with the conservative Jamaica Labour Party in power I was fired in December. During the election campaign, myself and other journalists were threatened by the conservatives that we would never work in Jamaica again. Myself and a colleague, Brian Meeks, took the government to court and won a case for unfair dismissal.
So after my dismissal the question was: what was I going to do with my life? I considered doing a PhD. But I was approached by two leading members of the PNP, the party’s then general secretary, DK Duncan and the now former wife of Michael Manley, Beverley Manley, asking me to come and work for the Party as a researcher. I said yes, and that decision led me to work for the Party secretariat. I became the secretary of the Political Education Commission of the Party, and that is the role in which I met Michael Manley. We became very close over the years. When he became Prime Minister in ‘89, he asked me to come to Jamaica House—the country’s 10 Downing Street if you will. I still wanted to do a PhD, but I ultimately agreed. We had our political disagreements, but our relationship deepened. I worked with him as his special assistant and what is today called a chief of staff.
In this capacity we travelled to many meetings. On one occasion, he had to visit the White House. Typically, on those occasions the Prime Minister would be joined by the Minister of Foreign Affairs, but Manley wanted me there in the private meeting in the Oval Office with President Bush Sr. When the meeting began, I understood why Manley wanted me there. There were three main items on the agenda. The first was the drug problem which was beginning to create real problems for many Caribbean states. The second was about the multilateral debt of Jamaica and the region. The third was to ask the US to lift its embargo on Cuba. The plan was that Prime Minister Manley would go speak to Fidel Castro. Former President Carter would then visit Cuba to advance the negotiations. And the White House would stay out of it until it was clear that the conversations and negotiations had arrived at a certain point. The one US condition was that Cuba would release a number of political prisoners.
After that meeting, we went to Cuba and spoke to Fidel who said, “We don’t have any political prisoners.” When we conveyed that to Brent Scowcroft, the US National Security Advisor, the deal fell flat. Those are the sort of things Michael and I were involved in and the foundation for our relationship. We remained close long after he left office. When he passed away, I was doing my postdoc in the United States at Howard University, and I flew back immediately to help organize his funeral.
WK: Can you paint a picture of the social and political environment that Michael Manley came of age in? On the one hand, there’s the the class and racial contexts in Jamaica, such as the “color-classism” of the planter class, and on the other hand, there’s the “political unionism” of the labor movement and its relationship to the two mass parties.
AB: Michael was born in 1924, when Jamaica was still firmly in the grip of British colonialism. He was born to an upper middle-class family and his father was one of the most important lawyers in the entire Caribbean. His mother, who was born in the United Kingdom, became a widely revered artist and very important in Jamaica’s artistic community. Both of his parents lived their lives according to a powerful ethic of public service. She was known for challenging the racial colonial representation of Black people in the colonies. One of her most important works was called Negro Aroused. His father Norman Manley actively served working people alongside his list of very important clients. Living in London as a Rhodes Scholar, Norman Manley also developed Fabian Socialist ideological views.
In 1938, major workers’ riots broke out across the country as well as across the Caribbean. The strikes prompted Britain’s colonial office to reflect on how it would manage this emerging trade union movement. Prior to ‘38, we had the Universal Negro Improvement Association in the Caribbean, which was founded by Marcus Garvey. That is important because many Garveyites later joined the People’s National Party (PNP). After the labor riots in the 1930s we had the Bustamante Industrial Trade Union (BITU) and the PNP led by Norman Manley—an organized labor movement, and a nationalist anti-colonial movement. That was the political configuration of the time.
I have argued that the PNP was a mass anti-colonial movement that transformed itself into a political party in 1944 with the advent of universal adult suffrage. The BITU was a mass trade union movement linked to Bustamante, who was originally a member of the PNP. He was imprisoned for his union activities and left the party upon his release, forming the Jamaica Labour Party (JLP) in 1943. So the union movement is attached to that party, and so when Bustamante leaves the PNP, Norman Manley and others in the PNP leadership form the Trade Union Congress as a counter to the BITU. So both parties in the 1940s were rooted in organized working-class activities. You can say following conventional labels that the JLP is center-right and the PNP is center-left, but it’s important to note that both parties engaged in a relationship with mass movements that no longer exists today.
The PNP also had immediate connections to the British Labour Party and Fabian Socialism. Stafford Cripps, the left leaning former Chancellor of the Exchequer, was present at the PNP’s inaugural conference. So while at its birth the PNP’s primary objective was political independence, it also had a socialist foundation.
Michael grew up in this environment, he would come home and hear his father’s political arguments. Both his mother and father were both actively involved in public life. He attended the same elite colonial school that his father had gone to, Jamaica College, after which he briefly studied at McGill in Canada before moving to London. At the LSE, his greatest influence was the English Socialist and later chairman of the Labour Party Harold Laski. Initially, under the influence of his mother, he had wanted to study Art criticism, but by the time he finished the Latin requirements he ended up opting for a degree in Government/ political science.
Laski’s left-wing socialism, which was to the left of the Labour Party at the time, enormously shaped his thinking. As did the cohort in the West Indian Students Union—which included figures like Errol Barrow, later Prime Minister of Barbados, and G. Arthur Brown, later governor of the Bank of Jamaica. Elsa Goveia, the extraordinary Guyanese historian who became the first chair of West Indian History at University of West Indies, was also there. This was not the generation of the ‘20s and early ‘30s who had come to London, people like CLR James, George Padmore, Amy Ashwood Garvey as well as the cricketer Learie Constantine. It was an explicitly anti-colonial generation who came together in the ‘40s and ‘50s in London, primarily as students. It was also a Federalist generation. They thought of themselves as not only participating in the separate political life of Guyana, Barbados, and Jamaica, but advancing a Federation of the Anglophone Caribbean.
By the time Michael returned to Jamaica in the late 1940s, he had abandoned his dream of being an art critic and he decided to pursue a career as a political journalist. He started working for a newspaper called Public Opinion, publishing a remarkable column called “Root of the Matter.” Politically, he became an ordinary group member of the party and when the party split in 1952, he began to play a more active role. This split was brought on by the increased pressures of the Cold War. In Jamaica, during the period of anti-colonial twentiethcentury agitation Soviet-aligned Marxists led by Richard Hart and others along with the radical leftist Ken Hill had become incredibly influential both within the PNP and within the labor movement . The Right of the Party became increasingly concerned with getting the Marxists and left-wingers out, and they did so during the party conference of 1952.
After the split, Michael became part of an internal campaign which sought to articulate the difference between communism and democratic socialism. In this process, his political ideas were sharpened by attending hundreds of Party groups and listening and participating in the debates between Party members. At this point, he’s a journalist and a minor figure within the Party. But I would argue that his subsequent participation in the labor movement was perhaps most formative. He was brought into the labor movement through an invitation to observe negotiations by a PNP member and trade union leader. The story goes that at the negotiation meeting, the leader unexpectedly exited and left Michael in charge of the discussion. Hearing the list of worker grievances at this meeting is what turned him into a trade unionist. It’s his work in the sugar and bauxite belt that brought him in contact with the organized working class and shaped him into the politician he was.
Neil Warner: After Manley became prime minister, his government pursued a large number of ambitious reforms. Manley described his economic and political approach as an attempt to pursue a “third path,” contrasting it to the Puerto Rican Model—which Jamaica had initially pursued and which focused on seeking to attract overseas investment—and the Cuban Model—which was based on Marxism-Leninism and central planning. How would you describe this approach? What would you say were the most important and successful of these reforms?
AB: As I mentioned, Michael Manley’s upbringing is enormously shaped by the anti-colonial struggle. But after Jamaican independence was granted in 1962, Jamaican society did not decolonize in any substantive form. The plantations were still powerful and racial and class hierarchies remained intact. The dominant social order was constructed around black oppression drawn from the various structural legacies of the colonial order.
As a result, decolonization remained one of Manley’s core aims into the 1970s. But you couldn’t pursue decolonization without raising fundamental questions about equality, justice, and the structure of the national economy. Inhis first book, The Politics ofChange, Manley elaborates ideas on changing the actual colonial structure of Jamaican society. That involved overturning colonial laws like the Master Servant law, putting forward public programs like free education, and bringing ordinary Black people to the centre of Jamaican society. In his political practice, he attempted to dismantle the legacies of the old colonial order.
So it’s a period of, on the one hand, what Rex Nettleford calls “somebody-tization”: how the Black person becomes somebody. On the other hand, it was a period of reorganizing the Jamaican economy. Sugar was one of the most important industries in Jamaican society. In the decolonization process, a question emerged: Could those workers, whose ancestors had been slaves, participate in redesigning how the industry would operate? This was both a historical and political question given the island’s history as a slave sugar-producing colony. In the late 1970s, myself and others went to Westmoreland, a sugar-producing area, to help turn that land over to workers so it could function as a cooperative. That was just one of the programs Michael had put forward. Another was on literacy. Nearly 80 percent of the Jamaican population was illiterate as a result of British colonialism. Young people like me at the time were deeply involved in these programs that the Manley government had created.
In his negotiations with bauxite companies, Michael Manley opted for bargaining higher rates of compensation over nationalization. Bauxite is an extractive industry and as a result it is finite, so it made sense to get the best conditions we could during that period of extraction. How do I summarize the 1970s reforms? What I’ll say is that Michael Manley pursued a program of full decolonization.
All of these reforms made many members of the Jamaican national elite very uncomfortable. When low wage workers are given a minimum wage and domestic workers are granted rights, things just can’t continue to operate in the way they had before. In other words, when the power balance begins to shift, the elites become jittery. By the 1980s, elite opposition and opposition from multinationals had crystallized. As recent documents from the US National Security Agency demonstrate, the US also became concerned, and it is now clear that it acted on these concerns. Remember now this was the middle of the Cold War. Moreover, Michael supported Cuba and its intervention in Angola on behalf of the radical People’s Movement for the Liberation of Angola (MPLA). The MPLA at the time was struggling against South African expansion, which would not only spread apartheid but also weaken the anti-apartheid struggle within South Africa. All of these things came together in the 1980s.
Nw: This year is the fiftieth anniversary of the declaration of the New International Economic Order (NIEO), a program led by countries in the global South for a restructuring of the rules of the international economic system to end economic colonialism and dependency. Manley was known as one of the most influential advocates of the NIEO. Can you talk about Manley’s role in the NIEO?
ab: Manley realized that even though countries like Jamaica had gained constitutional independence, they remained wedded to a world economy structured by colonialism—what people like Kwame Nkrumah would call “neo-colonialism.” Transforming the world economy depended on altering price setting mechanisms and developing technological and energy independence. We grow the commodities, but we don’t set the prices and we rely on importing machinery and oil to process them. Because he was deeply invested in political and economic democracy, Manley was also very concerned with the rise of multinational corporations.
These problems could only really be dealt with through what Julius Nyerere of Tanzania and others called the Trade Union of the Poor. At the core of the NIEO was a new economic world order. It was based on the idea, as elaborated in 1979 in Arusha, Tanzania, that there was the need “to complete the liberation of the Third World countries from external domination.” Third World countries therefore had to band together to gain a say in the structure and operations of the world economy. Julius Nyerere and Michael Manley were a tag team in the NIEO. Both grew up in former British colonies. One had studied at Edinburgh University, the other in London. And importantly, they shared the sense that a real threat to postcolonial societies was the rise of a domestic elite that would mimic the old colonial rulers. Nyerere developed the Arusha Declaration, which was really about cauterizing the power of the new elite and their capacity to corrupt the state. Michael didn’t get that far, he was operating in a different political culture. But his ideas on socialism and decolonization were about constraining the power of the elite to leverage the state for their own purposes.
The NIEO ends up gaining the support of Willy Brandt and others in the Socialist International. James Callaghan, who was then Prime Minister, ultimately came on board. This became an international campaign to get the world to think about the structure of the global economy and alter it in a way that will benefit newly independent countries. This was not entirely the same as the Non-Aligned Movement, which was a political movement more than an economic one. The Non-Aligned Movement was transformed by Nyerere and Manley into a robust movement that challenged both the economic and political structures of the world at that time.
WK: You have spoken about the trauma of two defeats in the Caribbean—Michael Manley’s 1980 election loss, and the defeat of the 1983 Grenadian revolution. These were political, ideological and military defeats. Manley was prime minister of Jamaica for a final time from 1989 to 1992. This time, his government seemed to have been more reconciled to capitalism. How did he think about that change?
ab: The problems Jamaica faced with the IMF were global problems. There was a sophisticated analysis of these problems coming out of the journal Development Dialogue in a special issue edited by Tanzanians and Jamaicans. Within the PNP, you also had a huge debate about the IMF. The IMF was one of the core entities ensuring that Manley would lose the election. The structural adjustment programs were very harsh, and they explicitly called for the reversal of the reform program that he had initiated. This, combined with oil prices, political destabilization, and rising violence, all contributed to his defeat.
Let’s think about the 1980s. There are three key figures in the world during this decade: Margaret Thatcher, Helmut Kohl, and Ronald Reagan. They were united in their intention to shut down every progressive movement, domestically and internationally—whether it was the miner’s strike, the NIEO, or the anti-apartheid movement. These three individuals had an ideological view about what society should be. To quote Maggie Thatcher, “there is no society, there are only individuals.” Stuart Hall called this moment a revolution in ideas and social practices.
After Manley’s defeat in 1980, there was a meeting in Cancún in 1981 chaired by Reagan. Julius Nyerere attended to represent the NIEO arguments. When they got to that part of the agenda, Ronald Reagan said: “next item.” No one protested. That is what was reported back to Manley and he started to realize that the world had dramatically shifted. But he was still a politician, he had to lead his party to victory.
We had numerous conversations during this period. The way he put it to me was, in the words of Hamlet, “time is out of joint” for people like him. In his view we couldn’t, as an island of 2.5 million people, go against the tide on our own. So the new question was not abandoning all hopes of transformation, but rather how do we ameliorate the worst effects of the market? I want to emphasize that this was not a trajectory that he embraced with enthusiasm. But it was the only realistic path he saw.
There are many unpublished stories from this period. I’ll just recount one. When the PNP entered into office in 1989, one of the first things we did was go around to all the Socialist International countries. Michael met Felipe González in Spain and he told him that we’ve got a serious problem with foreign exchange, and we didn’t want to go to the IMF: “Can you help us out?” Gonzalez said: “talk to our finance minister.” That’s what they all did, they left it to the finance minister because they could not say yes. Every finance minister then asked if we had a standing agreement with the IMF.
Manley then sent me to the multilateral Inter-American Development Bank to negotiate a less onerous deal. There were some Latin American figures there, and we also had a Jamaican who was high up in the bank. I went to Washington to have breakfast with them. The first thing they said to me is that we had to privatize the Jamaica State Trading Corporation. That agency was scouring the world to purchase cheap pharmaceuticals and deliver them to public hospitals. In searching for arguments against this, I told them that if we put this before parliament, the public would turn against their intervention into our national sovereignty. And you know what they told me? They said, “as a debtor country, you have no sovereignty.” I put my knife and fork down, left the meeting, and told the Prime Minister that this was not going to work.
Manley became ill and retired, I finished my PhD, and we continued our regular discussions. As he got older he grew more and more convinced that the democratic left (and this is his phrase) had to assert a counter narrative to the neoliberal dogma. We even started working on a book together about the need for a distinctive kind of democracy and what would be the ideological and philosophical basis of a modern democratic left. But as his illness worsened the project fell to the sidelines. To be very frank, I felt I shouldn’t do it without him.
WK: More recently you led a commission that came up with a rethinking and restatement of the philosophical vision of the PNP. What was behind that rethinking and how did you find that experience? How are you thinking about sovereignty now?
ab: Once Michael Manley formally retired, people like myself began to feel that the party lost its vision and ambition to transform Jamaican society. We began to walk away. But a couple of years ago I was asked by members of the new leadership to help them revive the Party’s philosophical identity. I said yes for two reasons: One, which I said publicly, was because Michael had made it clear in our many discussions that it was my generation’s burden to put progressive and deep democratic ideas back on the agenda. Second, I felt that those of us on the left really did need to begin to do some of the work that Manley and I had begun to discuss before his death. It was an opportunity to work with a group of comrades and articulate where we stand.
To do this, I followed a democratic model of politics. I spent a lot of time in constituencies. I was back and forth between the US and Jamaica, doing surveys, interviewing people, doing deep listening. After that process was completed last year, we wrote up our impressions and submitted a document titled “ Where we Stand,” which was approved by the Party. We then set about translating these principles into economic policies. We received 602 recommendations from the party delegates at the last September annual conference about how to restructure the Jamaican economy. I can’t share that with you yet, but I think it is safe to say that there is a foundation for the process of transforming Jamaican society. However the jury is out on whether we will succeed.
The question of sovereignty remains important. I go back to the Caribbean writer and novelist George Lamming, who argued that the question of sovereignty is central for us in the Caribbean. And if you ask me, I would say to you that the only real sovereignty that we can have in the Caribbean is a Caribbean that is united. I mean the entire Caribbean, Anglophone, Francophone, Hispanic, Dutch and so on. It must first emerge in the imagination, through a belief that we are not overwhelmed by external economic and political forces. We have to imagine things beyond that which is given. And we must be united in doing so, because the structure of the global economy does not allow for individual sovereignty in the economic sense. The matter of sovereignty begins then with a political horizon. It will demand of us in the Caribbean a series of joint economic ventures as well as building the capacity to intervene in the world at the level of global politics. This means configuring new global relations and alliances outside of big power politics. There are still superpowers which dominate the globe but given the current multiple crises, new forms are called for. I think that is one of the contemporary legacies of Michael Manley.
Comments Off on Normalization and the Future of the Middle East
Before October 7, 2023, the pursuit of diplomatic and economic normalization between Israel and Arab states appeared to be the central trajectory for regional politics in the Middle East. With the prospect of an Iran deal buried, this path represented American designs for the region—in a bipartisan consensus launched by Donald Trump’s Abraham Accords and carried forward by the Biden administration. For Saudi Arabia, a pivot toward relaxing tensions with Iran while pursuing normalization with Israel was also the order of the day. All signs seemed to give National Security Advisor Jake Sullivan permission to blithely declare, a week before Hamas launched its incursion into southern Israel, “The Middle East region is quieter today than it has been in two decades.”
When October 7 happened, then, it’s no wonder that speculators immediately wondered if Hamas was seeking to smash the trajectory and prevent Saudi Arabia from joining its Gulf neighbors UAE and Bahrain on the short list of Arab states who have normalized relations with Israel. At this, they have certainly been successful: while the Biden administration has pursued Saudi-Israeli rapprochement throughout the genocide in Gaza, recent months have seen Saudi Crown Prince Mohammed bin Salman clarify to the Shura Council, and Foreign Minister Faisal bin Farhan to the readers of the Financial Times, that normalization would be conditional on the establishment of an independent Palestinian state.
In recent months, however, a countermovement by the US and Israel seems to sabotage alternatives to normalization by way of a widespread military assault on Iran’s sphere of influence. With Assad’s regime fallen, the diplomatic path taken by a new government—allying with the Gulf powers, or greater confrontation with Israel as it invades Syrian territory—may be an indicator of the strength of the normalization program. Much will depend on the approach of a new Trump administration, which may include the return of the architects of the Abraham Accords to the circles of American power, toward Israel and the region.
In order to understand the particular role of the Gulf states in the Middle East, their relationship to the Palestinian question, and the history of normalization, we spoke to Elham Fakhro, a researcher at the Harvard Kennedy School’s Middle East Initiative and the author of the new book The Abraham Accords.
An interview with Elham Fakhro
Jack gross: Let’s start with the Abraham Accords, signed in September 2020. Who were the players that were involved?
Elham fakhro: Trump’s immediate circle is very pro-Israel. For example, David Friedman, who became his ambassador to Israel, first started out as Trump’s lawyer before he was a presidential candidate. After Trump announced his candidacy, David Friedman pushed to become his advisor and got that role. Friedman shaped Trump’s platform on Israel and Palestine early on. He reversed the Republican Party’s endorsement of a two-state solution and insisted UNRWA was compromised by anti-Semitism. He himself was the head of an organization that fundraised for settlements.
Then of course there’s Jared Kushner, whose family is friends with Prime Minister Netanyahu. (There’s the frequently repeated story about Kushner being expelled from his bedroom as a teenager because Netanyahu was coming to stay.) During the Trump administration, Mike Pompeo became the first acting Secretary of State to visit a settlement. Friedman and Pompeo both speak of this conflict in religious terms. Friedman has openly stated that he believes that Trump was sent by God to save the state of Israel.
Trump was initially advised that bringing Palestinians to the table for peace talks was futile, and then pushed to adopt a series of very pro-Israel policies: moving the embassy to Jerusalem and walking back the 1978 Hansell memorandum, which states the US government position on the illegality of Israeli settlements. If you read Friedman’s biography, it’s very clear that he worked with Netanyahu to influence US policy rather than the other way around. He convinced the president to cut aid to UNRWA, another wishlist item for Netanyahu.
This all led to a boycott from Palestinian leaders, with Palestinian Authority Prime Minister Mohammad Shtayyeh stating that “the rights of the Palestinian people are not for sale.” Afterwards, Kushner still wanted to put together a plan for resolving the occupation, but this was delayed by Netanyahu running for reelection. During the summer of 2019, Trump launched the economic component of a new prosperity and peace plan in Manama. It was significant because the Palestinians weren’t in attendance. Eventually the Trump administration decided to also not invite the Israelis, and instead drew the Gulf states in as intermediaries into this diplomatic process for the first time.
The move represented a new strategy of geopolitical alignment. For example, the economic component of the peace plan was released in Manama, and at the event there was a lot of talk about Iranian extremism being the real threat in the region. It was an opportunity, especially for Bahraini leaders, to express how much they thought in accordance with the Trump administration. The White House also tried to draw the Gulf states in as financial investors in the proposed plan.
jg: What were the steps and issues that led up to this final plan being presented and signed in Washington? What did the plan say on the question of Palestinian statehood?
ef: Shortly after the Manama meeting, Netanyahu and Benny Gantz came to Washington for the launch of the political component of the plan: land swaps for the Palestinians and, in exchange, permission for Israel to effectively annex one third of the West Bank. Palestinians were offered land in Sinai to be linked to other Palestinian territories by a future high speed rail, which would rely on investments, presumably funded by Gulf capital, in exchange for these land swaps. But there was no guarantee of Palestinian statehood.
In lieu of a state, the Palestinians were offered a freeze on settlement construction for a few years, during which time they could decide whether they wanted to continue the talks or not. There was nothing on the right of return. The plan was, of course, rejected by Palestinian leaders. On the day that this rejection was announced, Netanyahu openly declared his intentions to annex the West Bank. This actually caused surprise and frustration among Trump officials who weren’t in support of unilateral annexation.
Trump’s officials were divided between supporters of Friedman who were on board with Netanyahu’s stance, and figures like Kushner who wanted a less extreme version of annexation. Trump was also unhappy—his team wanted to see Netanyahu engaged in the process that they had laid out.
This is when the UAE stepped in. UAE Ambassador Yusuf al Otaiba met with Kushner in DC and wrote an editorial in June 2020, originally published in Hebrew in one of Israel’s main newspapers. He argued on behalf of the UAE that annexation was not acceptable, and that plans for annexation and talks of normalization were contradictory. For the Israeli readership, he dangled the possibility of peace and emphasized commonalities over differences. This was the seed for what would become the Abraham Accords.
During the pandemic, Kushner and his advisor Avi Berkowitz traveled to Israel in an attempt to persuade Netanyahu not to annex the West Bank. It was plausible that Netanyahu’s threats were an electoral ploy directed at extremist settlers and Israel’s most right-wing factions who wanted annexation. The UAE had already indicated to Kushner its willingness to normalize, and this normalization could be offered to Netanyahu in exchange for halting the annexation. This effectively formed the basis for the Abraham Accords announced in August 2020 through Trump’s tweets. A month later, Bahrain’s Minister of Finance called Trump’s people to let them know that Bahrain wanted to join too.
jg: What was the immediate impact of the announcement of the Abraham Accords in 2020?
ef: Initially, the announcements triggered a flurry of petitions across the Gulf states from all kinds of civil society groups criticizing the UAE and Bahrain for their decisions. The response largely took place online, due to the pandemic. Religious scholars condemned it, and civil society groups led the oppositional response—I think we would have seen more protests than we did if it weren’t during the pandemic.
Nonetheless, the new relationship began to take hold and develop.
In the first two years after the agreement, bilateral trade between the UAE and Israel, the two most significant economies involved in the Abraham Accords, reached $2 billion. It’s now projected to reach $4 billion in the first five years, driven by significant investments by UAE sovereign wealth funds in Israeli startups and tech companies, as well as Israeli tourists coming to Dubai. Tourism doesn’t go both ways: In December 2020, about 70,000 Israeli tourists visited Dubai, while roughly 3,000 Emirates visited Israel. The Emirati state and popular media are very interested in pursuing this narrative that normalization is about tolerance and cultural acceptance, which also offers Emiratis the chance to go pray at Al Aqsa Mosque now. Yet there is a reluctance to embrace normalization at the popular level, not to mention a continued commitment to the rights of Palestinians.
On the military side, the US moved Israel from the European zone of command (EUCOM) to the United States Central Command (CENTCOM), which covers the Gulf and Arab states. This was meant to deepen engagement not only between Israel and the normalizing Arab states but also the broader community of Arab states that hadn’t normalized.
There was also significant economic coordination. The diamond industry, a huge source of convergence between Dubai and Israel, has become one of the major areas of trade. There are agreements between universities for enhanced cooperation, think tank agreements, and so on. I think particularly in the first year after the signing of the agreement, there was this huge state drive to involve Israel in everything, in both the UAE and Bahrain.
The Gulf States and Israel in the twentieth century
jg: I wonder if we could place the Abraham Accords into a longer history: How have the Gulf states seen the Palestinian question over the last century? From the Arab Revolt in 1936 and the Partition Plan of 1947 to the creation of Israel and the Nakba, the Six-Day War and the Yom Kippur War—what do those key moments indicate about the development of political power in the Persian Gulf?
ef: Each of these junctures has elicited unambiguous grassroots support across the Arab world for the Palestinians. In 1936, when news of labor strikes and armed revolt against Zionist settlers reached the Gulf through radio and newspapers, efforts to fundraise for them took place in several places, including Bahrain. The Emir of Sharjah, one of the seven emirates of what is today the United Arab Emirates (UAE), himself even donated to the cause. This emerged mostly out of the growing popular sense of Arab nationalism, and solidarity against the British—a colonial enemy intent on dividing the Arab world. Solidarity with the Palestinians in that context made sense.
The announcement of the partition plan in 1947 triggered some unrest in the nascent Gulf states. In Bahrain, workers and high school students went on three days of strike. In 1967, there were similar acts of solidarity, and rulers began to get involved. Sheikh Zayed of Abu Dhabi at the time sent aid to frontline troops in the conflict.There was direct involvement of a Kuwaiti contingent under Egyptian command in 1967—a change from before World War II, when the ruler warned citizens not to send money (presumably because the British, who were in control of Kuwait at the time, didn’t want to see the rise anti-imperialist solidarity across the Arab world).
dylan saba: The Yom Kippur War in 1973 saw the Arab states of OPEC launch dramatic production cuts and sales bans that dramatically impacted the global political economy. How did these events shape the future of the Gulf states’ political unity, and the geopolitical and diplomatic area in which they operated?
ef: The oil production cuts and export embargo that began with that war was one of the most successful examples of coordinated action between the Gulf states. Oil prices quadrupled in two months. High oil prices lasted for many years beyond the embargo, and generated windfall profits for the Gulf states. It also triggered several changes within the United States. The Nixon administration began what would be a decades-long project to diversify energy supplies beyond Middle Eastern oil. It also intensely pursued a diplomatic settlement to the Arab-Israeli conflict. Nixon and Kissinger began to recognize the real connection in the minds of Arab leaders between the peace talks to end the war and the politics of global energy markets.
The first Egyptian-Israeli disengagement agreements in 1974 paved the way for the subsequent Camp David Accords in 1978 and the peace deal between Egypt and Israel in 1979. The upshot to the oil embargo in the US was long-term diplomacy—both political parties realized they needed to do more to resolve the Arab-Israeli conflict. It taught the Gulf States how successful they could be through coordination. Greater political and economic unity arrived soon after with the Gulf Cooperation Council, which the Gulf states formed in response to the outbreak of the Iran-Iraq war in 1980.
jg: How did the Gulf Cooperation Council (GCC) come into existence in these pivotal years? Were there different visions of cooperation among the founders?
ef: The six countries that form the GCC—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—experienced relatively intense vulnerability during the Iran-Iraq War. The UAE did not want to take a side in the war. It publicly staked a nonaligned position and eventually leaders in all of those states agreed that creating formal alliances would be useful for their long-term security concerns. The other event is of course the Iranian revolution of 1979, which had enormous regional implications. For the Gulf nations, it marked the beginning of a deepening security relationship with the United States. These three events—the OPEC embargo of 1973, the Iranian revolution in 1979, and the Iran-Iraq War, particularly the Iranian offensive in 1982—were all decisive for moving the Gulf countries into closer collaboration with one another.
jg: You narrate the period of formation of the GCC during the Iran-Iraq War as the moment that the Gulf States began increasing military spending with new oil revenues and became major defense procurers. How have the Gulf States been shaped by this weapons outlet for their newfound wealth?
ef: The years immediately following the Iranian revolution were a real entry point for US expansion in the region, and Gulf leaders welcomed that expansion with enthusiasm. The rhetoric from Iran was about exporting its revolution. The region was on high alert, especially countries like Saudi Arabia and Bahrain with sizable Shia populations but Sunni rulers. The response among GCC members was to do whatever they could to bring the Americans more closely into the region as a deterrent. As a result, their defense spending grew dramatically. In Bahrain, defense spending became 8.5 percent of its GDP in 1982—two years into the Iranian revolution. The US Navy’s Fifth Fleet moved its headquarters to the country. That’s the moment when they began to see the US as the necessary protector.
From Oslo to the Iran nuclear deal
ds: How did the Gulf States relate to the Oslo Accords? Did they see a potential resolution to the Palestinian question—and thereby the question of normalization—or were they more trepidatious?
ef: At the start of the Oslo process, there was much optimism in the Gulf states that this issue could finally be resolved. Contingent on the idea that the peace talks would end with the creation of a Palestinian state, Oman and Qatar both began to open their doors to Israel by setting up preliminary trade offices in their capitals. Continued normalization of the Omani and Qatari relationship with Israel seemed possible. Both these trade offices were shuttered when a two-state solution did not materialize. In Qatar’s case, this happened partly as a result of both Saudi and Iranian pressure. In 2000, both Saudi Arabia and Iran threatened to withhold their attendance from an Islamic summit being planned in Doha. Qatar shut the trade office, and one year later the Second Intifada broke out.
Through this period, the Gulf states were broadly committed to the idea of “land for peace”—the international legal interpretation of UN Security Council Resolution 242—that had governed all Arab-Israeli peace discussions since 1967. Even during this first wave of post-Oslo dialogue, the broad balance of power in the region meant that normalization was contingent on Palestinian statehood. So when the prospects for that pathway fell apart with the breakdown of the so-called peace negotiations during George W. Bush’s presidency, the Gulf states, in turn, rolled back normalization.
jg: You mark 2006 as the next signal year for two major events that marked Iran’s growing influence in the region and the Gulf States’ fear of that influence. This fear was exacerbated during Obama’s tenure with the US-Iran nuclear deal. What is this next piece in the narrative that leads us to the Abraham Accords project under Trump?
ef: In 2001, Saudi Arabia had launched the Arab Peace Initiative, which was a roadmap for normalization designed on the land-for-peace formula. Endorsed by the Arab League, it also included the condition that Israel withdraw from the occupied territories—at that time including the West Bank and Golan Heights, and also Lebanon—and recognize an established Palestinian state.
Two events in 2006 would begin to bring several of the Gulf states into closer strategic alignment with Israel. First, Iran announced it had enriched uranium for the first time and begun a nuclear program. Second, Hezbollah pushed Israel out of Lebanon. Both of these events signaled to Gulf leaders the rise of Iran, along with its proxies and allies, as a serious force in the region. As in 1979, the region was again confronted with the idea of a rival force that could threaten their standing in the long-term.
This is when we begin to see visible outreach to Israel outside the parameters of the Palestinian question. Normalization of economic relations and progress on Palestine statehood began to decouple. In 2007, the UAE began to procure Israeli technology for a traffic management system and Israeli satellite data to surveil Iran’s nuclear program. Behind the scenes, the Israelis, the US, and officials from several Gulf states—Bahrain, Saudi Arabia, and the UAE—enter into discussion, later revealed by WikiLeaks, about the shared threat emanating from Iran.
From the Gulf perspective, these conversations in the Obama years centered on how to convince the US to take a stronger stance against Iran, invoking greater sanctions and isolation. Israel appeared useful to them in gaining leverage in Washington.
ds: How do you understand the tension or continuity between the Gulf States’ movement against the Iran nuclear deal, Joint Comprehensive Plan of Action (JCPOA), and the Trump administration’s execution of the Abraham Accords?
ef: The Gulf’s relationship to Iran has had two phases: the first, from 2006–2019 was more confrontational; the second, which I believe we’re still in, is characterized by de-escalation, with the overwhelming message being one of building positive ties and avoiding conflict.
Between 2006 and 2019 the Gulf states wanted sanctions, and some even quietly supported direct military action against Iran. They and Netanyahu shared the view of the JCPOA as a deal that paved Iran’s pathway to a bomb instead of hindering it. The Gulf states wanted the JCPOA to target Iranian missile production—a threat, they argued, on par with a nuclear program.
Two events brought a shift in this approach. The first was the tanker attacks that took place off the coast of the UAE in the summer of 2019, targeting four tankers from three different nationalities. The next was the strike on Aramco in Saudi Arabia, for which the Houthi forces claimed responsibility. Both of these events triggered a real change of thinking for Saudi Arabia and the UAE, particularly because they occurred during a Trump administration. With the US not coming to their aid, and Iran indirectly suggesting that the attacks were in retaliation for Trump’s withdrawal from the JCPOA, the Gulf states began to move toward diplomacy with Iran. Following those 2019 attacks, the UAE and Iran hosted multiple diplomatic exchanges. And significantly, Saudi Arabia and Iran restored relations after seven years, in a deal brokered by China. In the last couple of months there have been other visits, very interestingly, between Saudi and Iranian ministers in Doha, which would have been unthinkable a few years ago. So Gulf leaders are putting their efforts towards de-escalation with Iran. They are sending a clear message that they do not want to get caught in the middle.
jg: The Arab Spring was another source of instability for the Gulf powers. Could you talk a little bit about how 2011 impacted these governments, and by extension how they view popular dissent regarding normalization?
ef: Several factors led to this rapprochement between the Gulf states and Israel. The first were the 2006 events that we talked about. The second was the rise of this new generation of Gulf leaders less interested in the Israeli-Palestinian question, and way more focused on the alleged threat from Iran. These leaders tend to be more Western-educated and pro-US, and they don’t really have the commitment to Arab nationalism their fathers used to have.
The third was the Arab Spring, where there was again convergence between Gulf leaders and Netanyahu on diplomatic alliances. At the time, Netanyahu described the Arab Spring as another 1979—another threat to Israel’s security. Meanwhile, the Gulf states were concerned that pro-democracy movements would empower Islamist elements in the region and threaten their long-term survival. Both Netanyahu and Gulf leaders agreed that the Arab Spring was a threat to the regional status quo.
The repression of civil society is effectively part of what makes normalization possible. For example, Bahrain actually had an uprising similar to the bigger mass movements that we saw across other parts of the region and GCC forces mobilized to bring an end to the movement. The agreements with Israel are deeply unpopular. They are only made possible because popular representation is absent. Even pre-normalization, there were polls carried out regularly across the Arab world asking whether the public would support relations with Israel. And in the Gulf, between 85 to 95 percent of the population consistently oppose. Normalization could not have happened except through repression, and this has only continued post October 7.
October 7 and the Abraham Accords today
ds: How has October 7 influenced the question of normalization?
ef: The Gulf States do not want to see escalation between Israel and Iran. They know that they’re caught in the middle, and would suffer at minimum indirect impacts on their economies from further escalation. The genocide in Gaza has put limits on a more aggressive timeline of normalization with Israel—not necessarily because the regimes are moved by the Palestinian deaths, but because popular outrage within their countries has made it clearer than ever that the Abraham Accords and the legitimation they afford Israel are deeply unpopular.
But to me, October 7 and the year since has been the ultimate test of normalization. Even after what Israel has done in Gaza and Lebanon—the extreme civilian toll and suffering, the dramatic destabilization of the region—the goal of normalization has survived among the Gulf states. They haven’t expelled ambassadors or done anything substantive to disrupt their relationships with Israel.
ds: Military technology and intelligence have been a lure for Gulf states, particularly the UAE, to pursue normalization with Israel. But October 7 in many respects represented a failure of both of these supposed assets. Does that factor into the Gulf states’ evaluation of their relationship with the US and Israel, especially given that Iran in some way may view them as partial proxies for the United States?
ef: One of the drivers of normalization is certainly the ability to acquire technology from Israel. While October 7 was a security failure for Israel, that doesn’t diminish how useful the Gulf States see its technology, particularly its antimissile technology.
When the Abraham Accords were first signed, not a single word was said about security or tensions with Iran—it was all about economic cooperation, people-to-people ties, trade, commerce. This is a very striking omission, because these states are now engaged in the kind of second phase diplomacy toward Iran, no longer actively antagonistic. They still want to acquire weapons and intelligence from Israel to protect against future attacks from Iran, but at the same time they don’t want to provoke future attacks from groups close to Iran by engaging in this confrontational military language. If you look at the first year of the Accords, there isn’t much said on technology or military transfers.
This evolves in the second year of the Accords. In January 2022, the UAE was hit by three missile attacks. In response, UAE for the first time publicly requested antimissile tech and anti-drone tech from Israel. Israel gave them technology very similar to what they asked for—the Barak system, which the UAE deployed shortly afterwards. Emirati leaders think Israel, rather than the US, came to their protection. Several days afterwards, Israel sent a team over to the UAE to investigate how the attacks had happened. Bahrain, in contrast to Saudi Arabia and the UAE, very early on made approving statements that the Mossad is present in Bahrain. This, I believe, showcases a slightly different, and somewhat more confrontational approach with Iran.
On the domestic governance front, Israeli spyware, such as Pegasus, helps the Gulf states manage internal dissent. Pre-October 7, there was the sense that Israel had effectively managed a permanent occupation, relying on very advanced technology in order to do so. Some knowledge transfer regarding both the technology and the organizational approach of policing a subject population was valuable to the Gulf states.
The use of spyware has been documented in the UAE against some of its most high-profile dissidents. In the book I mentioned the case of Ahmed Mansour, who was targeted multiple times. While the kind of surveillance software used to track him has confusing origins—its being sold through Cyprus or other places—some of it was certainly Israeli. Bahrain has been less tech savvy on this front. Dissent in Bahrain has been much more visible than in the UAE, and it incorporates a much bigger section of society. During its Arab Spring, Bahrain relied on more typical forms of suppression, like arrests and interrogations. But I wouldn’t be surprised if Bahrain was also acquiring more sophisticated spyware.
ds: You spoke about how the Gulf States, in pushing a particular narrative around normalization, have sidelined the issue of Palestine and portray the Arab-Israeli conflict as something older or in the past that can now be essentially managed rather than negotiated. October 7 was both a reaction to that move and a disruption of that narrative.
ef: This is exactly the rationale behind normalization: The Palestinian question is unsolvable; therefore, not much energy should be expended in trying to resolve it—but at the same time, why let it get in the way of building closer ties with a useful partner? The generational leadership change in the Gulf can be characterized by this sentiment.
This view was shared by US officials in the Trump administration. But October 7 showed that actually the Palestine question cannot be contained. Even if you aren’t really concerned with the occupation, its eruption into a very devastating conflict has implications for regional and economic stability. Take the Houthi attacks in the Red Sea or the occasional missile launched from Yemen—this becomes an immediate issue for Saudi Arabia, which is developing Neom right on the Red Sea. October 7 dispelled the narrative of normalization and showed that you couldn’t just put the issue of Palestinian statehood in a box and forget about it.
Another consequence of October 7, of course, is this real outpouring of Arab support for the Palestinians. It has dispelled the myth behind the Abraham Accords that the Gulf populations don’t really care about the Palestinians anymore and are happy to normalize. For states more vulnerable to civic unrest, like Saudi Arabia, it’s increased the cost of normalization.
ds: It seems that, despite the fact that the war has made normalization much harder to achieve, the Biden administration has tried to resolve the war with normalization itself. Is this a desperate position from the Biden administration? Or is there really the possibility of a deal in which normalization plays a central role, and Gulf states buy into the external administration of Gaza
ef: The approach held by Brett McGurk, Tony Blinken, Jake Sullivan, and so on is exactly that: a grand bargain whereby Saudi Arabia can be brought in and offered normalization and a Palestinian state—or at least some pathway toward a Palestinian state—in exchange for a defense deal. Saudi Arabian officials have clarified several times that they won’t settle for anything less than Palestinian statehood. And what they’re looking for from the US is pretty significant—not just a binding security agreement, but something akin to an Article 5 NATO agreement, whereby if the Saudis are attacked, the US is compelled to respond. In addition to that, they want advanced antimissile tech and access to a civilian nuclear program.
Normalization with Saudi Arabia is far from a done deal, and I think US officials have been overly-optimistic. The US long-term strategy is to delegate its regional policies to an alliance of Sunni Gulf monarchies and Israel. But there are several sticking points to this. The first is whether Congress would ever give Saudi Arabia what it is asking for. Second, there’s the requirement of a Palestinian state, which the current administration in Israel—the most right wing in its history—wouldn’t agree to. No Israeli leader supports this, and the US presidential election, from the point of view of the Arab world, was a contest between bad and worse—carte blanche has already been given to Netanyahu, and there is no reason to expect Trump’s second term will be different from his first.
So the question then becomes, would the Saudis agree to normalization without a Palestinian state? It’s not clear. Some say the Crown Prince clearly doesn’t consider a Palestinian state to be a priority, and any token gesture would suffice. The other view is that it would be too much of a risk to antagonize their domestic population. The Saudis led the Arab Peace Initiative, and they don’t want to lose their clout—let alone alienate millions of Muslims beyond the Gulf who are dedicatedly pro-Palestinian.
Brazil’s low-carbon energy sector is often spotlighted in international forums debating solutions to the global climate emergency. While agribusiness and the extractive industry are the main contributors to the country’s polluting emissions, renewable sources, especially hydroelectric power, prevail in the generation of electricity that supplies public facilities, homes, and industries. But even though the Brazilian electricity sector is widely considered to be “clean,” its history and politics cannot be ignored in a genuinely just project for transitioning away from fossil fuels.
This is due to the way the sector has been privatized in recent decades. The electrification of Brazil does not neatly follow the country’s political history. Following the high-modernist pattern of the twentieth century, demand for electricity grew exponentially with urban population and basic industry during the 1920s and 1930s. This was only possible due to state regulation. The 1934 Water Code was the first major instrument that allowed the Brazilian state to establish the criteria for expanding hydroelectric power. By the mid-1940s, regulatory law ensured that state and national governments held the majority of ownership and control over the generation and distribution of hydroelectric power. The development projects of Getúlio Vargas (1951–54) and Juscelino Kubitschek (1956–1961) included a series of public investments in infrastructure that significantly expanded the country’s electric capacity. These culminated in the 1962 establishment, under João Goulart (1961–64), of a state-owned electric company, Electrobras, designed to coordinate, oversee, and execute projects related to hydroelectric production.
This trend toward public ownership and planning was not discontinued under the 1964 military coup. What changed with the Brazilian dictatorship, however, was the nature of investment. Dependence on international private capital for productive expansion significantly increased. During the dictatorship, sixty-one large dams were built. Hydroelectric generation was crucial to the so-called “economic miracle” of the authoritarian regime: during the 1973 oil crisis, 90 percent of the electricity generated in Brazil came from hydroelectric sources. However, the deterioration of the international economic environment during the 1980s exposed the fragility of the miracle: the exponential growth bequeathed by the dictatorship was actually one of social inequality and foreign debt.
Retracing the history of Brazil’s clean electricity sources is essential to understand the terms of the country’s climate transition. The construction of power plants, especially during the military dictatorship, entailed social and environmental damage as significant as the structural advances achieved. In the regions where they were built, the dams displaced thousands of people, flooded entire towns, and eliminated biodiversity in ecosystems. Public investment in infrastructure guaranteed Brazil’s energy sovereignty. But the military’s political repression concealed the increase in international dependence, and developmental constraints, this entailed. The widespread lack of social and environmental compensation that marked the years of expansion of the country’s system hydroelectric generation exposed the flaws of an unjust economic development model.
Redemocratization promoted a perverse shift away from the continuous energy developmentalism of the Vargas era, the Fourth Republic, and the military dictatorship. While the Movement of People Affected by Dams (MAB)—an organization aimed at defending the interests of the populations affected by the generation, distribution and sale of electricity—emerged among the social movements of the 1980s, from the 1990s onwards the electricity sector was largely privatized. Since then, the electric grid has been characterized by private control, with a strong presence of interest-bearing capital, company indebtedness, and the internationalization of prices and rates. Privatization, however, did not end the exploitation and violation of the rights of populations affected by the hydroelectric system. The climate crisis, in light of this history,has brought new urgency to the claims of environmental justice made for years by organized sectors of Brazilian society. Hugo Fanton, editor of Phenomenal World, spoke to Gilberto Cervinski, leader of the MAB—a movement that has recently begun to include families affected by mining following the construction of dams and climate change-related events, such as the floods that hit southern Brazil this year.
Cervinski holds a master’s degree in Energy from the Federal University of ABC (UFABC) and is a collaborating professor on the Energy and Society in Contemporary Capitalism graduate program at the Urban and Regional Research and Planning Institute of the Federal University of Rio de Janeiro (IPPUR/UFRJ).
An interview with Gilberto Cervinski
hugo fanton: How is the electricity sector in Brazil organized and why does the energy transition issue depend on its transformation?
GILBERTO CERVINSKI: The electricity sector in Brazil, which represents one part of the energy issue, was traditionally structured by the state and public companies—such as Eletrobras and state companies—that built the power plants, transmission lines, and organized the process of distributing electricity to the cities. This model lasted until the 1990s, when a process to privatize the sector began. The most efficient and largest load-bearing power plants and transmission lines in this industrial complex were privatized. As a result, wholesale rates and final prices for the population increased. Now we have a privatized electricity sector. Those who control the power plants, transmission lines, and distributors are the big banks and speculative investment funds: nowadays, the owner of all the power plants is interest-bearing capital, which we call parasitic capital. A related feature of the current model is the composition of energy prices: we currently have one of the lowest energy production costs and one of the highest prices in the world for the population. It’s a great contradiction. This is the model that has been in place since the 1990s.
When we at MAB talk about the need to create a popular energy project, we are saying that Brazil must fundamentally change the pricing policy, recover sovereignty, and guarantee rights and adequate reparations for the people affected by the construction of the grid. This cannot be reduced to hydroelectric plants. The fight for a popular political project organized around energy is therefore a movement for changing the nation’s energy policy on all these bases, from the dams themselves to the larger question of environmental policy. This year we are experiencing the longest drought in the history of the Amazon, which is being burned to the ground. And why is that? Because major landowners are setting fires to raise cattle. These are the issues that must be fundamentally changed.
hF: Why are retail energy prices so distorted from generation and distribution costs?
GC: With privatization, rates were reformulated based on international energy prices—which are determined by the costs of coal-based thermal energy. But here energy is produced by hydroelectric plants. We have river basins with twenty plants, one right below the other. The same water produces electricity twenty times over the course of a basin—this water is renewed at no cost. But these very low costs do not translate into benefits for the people. On the contrary, it is a mechanism for accumulating wealth based on the difference between low production costs and high tariffs. This is because the regulatory agencies that oversee energy policy are captured by private finance, by the banks. In addition, there are violations of the rights of both workers in the sector and the populations affected by the projects. Power plants are built and the people affected are expelled from their territories without compensation or reparations.
More than 80 percent of the electricity produced in Brazil comes from renewable sources, mostly hydroelectric, which accounts for 70 percent of actual electricity production. The remaining 10 percent comes from wind and solar sources. There is no cost for water like there is for coal, oil, and natural gas. In Europe, for example, producers need to buy fuel and burn it in a thermoelectric plant to produce electricity. Here in Brazil, we have many large self-replenishing lakes. It’s the lowest production cost when compared to other renewable sources or to thermoelectric or nuclear energy. But since the sector has been privatized, the price is not based on the cost of the hydroelectric plant. The international price is adopted. And the price that prevails in the world is based on what the world produces, coal-based thermoelectric power, which is precisely what costs the most. That is the reference for what they call the “ceiling price” of energy. Here, the ceiling price is adopted, the highest in the world, with the lowest production cost, so the profitability rate is extremely high.
hF: Who benefits from the present model?
GC: The banks and financial funds made a huge move during the Cardoso administration to control the Brazilian electricity sector and extract extraordinary profits. There has been a strategy of indebting the energy companies—today, they are over-indebted, paying extremely high interest rates. This cost is dumped on the consumer’s electricity bill. So there are two mechanisms that guarantee extremely high profit rates: the companies’ indebtedness and the electricity bill itself. It is parasitic capital that extracts income from all workers in Brazil. Energy prices and rates are central to the control and distribution of national wealth: they work as mechanisms for extracting income from the masses through the payment of electricity bills. In Brazil, there are 80 million residential consumer units: families that pay electricity bills. If we adopted a real price policy, consistent with the Brazilian system of low-cost generation, people would pay a lot less. There wouldn’t be this extraction of wealth from their hands. With an energy policy that guarantees high prices, a portion of workers’ wages is expropriated and concentrated in the hands of the banks and financial funds that control the sector.
hF: In 2012, Dilma Rousseff issued Provisional Measure 579 to change the way prices were set in the energy sector. Can you explain the context in which this happened and why the initiative failed?
GC: Brazil’s large hydroelectric plants were built in the 1970s. The government concession contracts for 60 percent of them were due to expire around 2012. The thirty-year concession paid off the debt incurred in building the plants: as of that year, these plants would no longer have any remaining debts from the initial investment. The proposal was to offer the country energy under new terms: at cost plus an average profit rate. This was Dilma’s policy: offer the country energy at the real cost of production, since the Brazilian people had already paid for hydroelectric plants over thirty years of concessions.
This created a political problem. Under the proposal, generation plants would no longer carry interest costs, which triggered a strong reaction from Brazilian bankers. The Rousseff administration was calling into question two components of the extractive model: the price of electricity bills and the payment of interest on companies’ debts. The president picked a huge fight with financial capital over this. No wonder financial capital was one of the leading sectors favoring the impeachment process. The result was the coup of 2016.
What happened after the coup? Instead of Dilma Rousseff’s proposal of reducing electric company debts and retail prices, the companies incurred new debts—as if the old hydroelectric plants were being built again.1 Each of them now has a new debt and is paying interest on it, once again paying for the investment in their production. And who owns the debts? Private finance.
hF: The privatization of Eletrobras was also part of this backlash from financial capital. What were its implications?
GC: After the 2016 coup, there was a move to privatize Brazil’s last major state-owned company, Eletrobras, which owns forty-eight hydroelectric plants in the country—the ones with the highest quality from a financial perspective, with debts that have been amortized. Capital didn’t want to pay what these hydroelectric plants were worth. So the privatization was carried out by the Temer administration transferring control of the company for a price far below what it would cost to sell the hydroelectric plants. This privatization was outrageous. Currently, the government controls only 10 percent of Eletrobras. Everything else is in the hands of finance capital. It was a process of plundering national wealth: 48 hydroelectric plants transferred overnight to the control of private capital, unnecessarily. And we can already see the consequences: further price increases and higher electricity bills.
hF: What would a change in the energy system to address the climate crisis mean in a country with such characteristics?
GC: The environmental debate has been going on around the world since at least the 1970s. Eco 92—the United Nations Conference on Environment and Development of 1992, or “Earth Summit,” which took place in Rio de Janeiro—was also an important milestone. Yet throughout this period there has been a linear increase in fossil fuel usage—oil, coal, and gas consumption— and a parallel upward trajectory of greenhouse gas emissions.
It’s not only fossil fuels that cause gas emissions: here in Brazil the main cause is agricultural activity. They call it agribusiness, we call it the agrarian bourgeoisie. They produce and want to expand areas for soy, beef, cellulose, and sugar cane. In order to do so they want to deforest both the Amazon and the Cerrado, areas of the country that still have standing forests. This is a second front, therefore, of the climate transition. In the case of Brazil, we must combine changing the energy matrix with curbing the agrarian bourgeoisie’s drive to destroy forests. We need to contain deforestation, which implies a profound change in agricultural production. And when we talk about changing the energy matrix, it’s not about changing the source of electricity, but about energy policy. That’s what needs to change: the pricing policy and the control of generation, as well as the fuel sources.
hF: Specifically regarding electricity production, what would be the necessary changes?
GC: Brazil perhaps has the best conditions in the world for generating renewable energy, with 230,000 horsepower installed in power stations built over the last hundred years. And it has the same amount of potential for offshore wind energy production. We also have regions of extremely high solar radiation, equivalent to deserts, as well as biomass and hydroelectric potential. In other words, Brazil has one of the best production conditions in the world. It has great hydroelectric potential.
Despite having several options, big businessmen in the energy sector want to resume the construction of huge hydroelectric dams with large lakes in the Amazon. This means flooding thousands of hectares of forest. Why is this so interesting? The answer lies in energy policy, for what and for whom this electricity is destined, and in a speculative logic of the industry’s new owners. Now they’re proposing to privatize the forests here. And what is forest privatization? It’s handing over the exploitation of forests to big farmers and banks. It’s not preservation. It’s increasing private ownership of reserve areas. The initiatives to monetize and commodify the climate prevent a real solution. Who benefits from carbon credits here? It’s precisely the farmers and power plant controllers. In other words, it’s a financial mechanism that, under the guise of protecting nature and reversing climate change, benefits exactly those who are actually causing the problem.
This is what we need to tackle. Even though renewable energy is available, the Brazilian people are punished. We have to change national energy policy, pricing policy, and control over production and distribution. The environmental problem is serious, but the solution presented by financial capital is financialization and privatization. What we have been doing is exposing the fact that the privatization and commodification of the environment will not reverse the climate problem. Quite the opposite
hF: How does MAB operate in this scenario?
GC: MAB has a history linked to the impacts of hydroelectric dams, going back many decades. The movement comprises people who have been forced out by the construction of hydroelectric plants, without compensation or reparations, in various corners of Brazil. Over time we have become a national organization. The name is Movimento dos Atingidos por Barragens (Movement of People Affected by Dams), but there has been a change in recent years, because it’s not just those affected by hydroelectric power plants, but also those affected by two new situations that are very similar. The first is the collapse of tailings dams—dams created by mining waste—in Mariana and Brumadinho, in the state of Minas Gerais. There are several others that have broken in different parts of Brazil. These affected people are also organized in MAB.
We have come to also include, over the past few years, those affected by climate change, such as the people impacted by the rains on the coast of São Paulo and, now, the more emblematic case of the major floods that swamped Porto Alegre and other cities in Rio Grande do Sul. Our struggle is both for the rights to compensation and reparation of those affected, and for a popular energy project to transform the prevailing business model of electricity generation. Our history is intertwined with the energy issue, which is why we analyze the sector, publicly discuss these aspects, and fight to transform national energy policy.
hF: What is the current situation of those affected by dam collapses in Mariana and Brumadinho?
GC: Over nine years have passed since the dam collapse in Mariana. To date, families have not been compensated. The dam broke in the state of Minas Gerais, near Belo Horizonte. The toxic mud fell into a watershed formed by the Doce River, which runs for 670 kilometers to the coast of Espírito Santo. The entire river was destroyed by the mud, which then invaded the ocean and reached Abrolhos, in Bahia. We are currently organizing people throughout this region. Due to making greater demands and the Lula administration’s sensible approach, there is now a major compensation agreement for the families being discussed with the companies. Just to give you an idea, 700,000 people are suing the companies in London, because the Brazilian courts have, in a way, sided with the owners of the companies. The families have filed a lawsuit abroad to seek redress, and this is helping to speed up the settlement now.
As for Brumadinho, the mud reached another river basin, the São Francisco. Thousands of people were affected. An agreement was reached recently, but the families still haven’t received their compensation, so the fight now is for the agreement to be fulfilled and for the basin to be rehabilitated. And these people are organized within the movement, fighting for their rights. There are several fronts of action, because the problem has affected people, communities, the river itself, the flora, and even the sea. It’s a very complex process, and MAB is prioritizing the issue of those affected.
hF: And what’s the situation in Rio Grande do Sul?
GC: There are six basins in the Porto Alegre metropolitan area. They all flow down towards the capital of Rio Grande do Sul. In May 2024, it rained 900 millimeters in five days. The average in the region is 170 millimeters a month. All this water overflowed the river, which rose from 13 to 33 meters deep. The water carried everything away, bringing down houses and entire neighborhoods. More than 200 people drowned because the water rose so quickly. In all, more than 2 million people were affected in the state. Porto Alegre had a wall protection system to prevent flooding, because it is a city on a level with the Guaíba River. The municipality is responsible for maintaining this system, but in recent years, fascist and neoliberal mayors have neglected the system’s maintenance and it hasn’t worked when needed. Porto Alegre and the metropolitan region were flooded for 21 days because of this. People lost everything they had, their homes, their furniture, everything. So, in some places, the fight is about rebuilding homes and getting families back to where they used to live. We are organizing all these families. People have identified with the movement: we’ve brought together those who have lost their homes to flooding, mudslides, or dam construction. These families have legitimate claims and, of course, that places pressure on government at the center of our campaign.
As the nation prepares for a second Trump administration, the mood among many Democratic Party officials has been one of bafflement and astonishment. How could voters have failed to rise to the defense of the democracy and “institutions” that Democrats spent eight years lionizing as bulwarks against an incipient Republican Party fascism?
Among the electorate, however, disappointment is just as likely to be at the choices on offer as at the outcome itself. The Pew Research Center in exit polling found 64 percent of respondents thought the campaign “was not focused on important policy debates.” In pre-election polling, it found 63 percent of Trump supporters and 62 percent of Harris supporters sharing such sentiments.1 Given how diminished the scope for change appeared to most voters, it is perhaps unsurprising that turnout fell by 2.6 million voters below the level of 2020—while the voting-eligible population increased by 3.5 million—with those staying home concentrated among large cities in swing states: traditionally Democratic-voting precincts.
What explains the American party system’s continued rightward drift? On this question few analysts have offered insights as trenchant and consistently significant as Thomas Ferguson, currently Director of Research at the Institute for New Economic Thinking. For the past four decades, he has argued that American politics is best explained by an “investment theory of politics.” According to that theory, electoral outcomes are shaped by competition between the parties not over the preferences of voters—as argued by the “median voter theorem” popularized by postwar social science—but rather by a different set of preferences altogether: that of donors.
Countless surveys show that voters preoccupied with life and work are uninformed when it comes to the finer points of foreign trade; the federal budget; or the determinants of investment, unemployment, and inflation. If they must select among candidates and platforms decided elsewhere, how are those choices defined? To either the chagrin or inspiration of many historians, economists, and political scientists, Ferguson has spent decades in campaign-finance records and the historical archives of key twentieth century business and party leaders.2 The evidence he’s found demonstrates that the complex of business corporations and their financiers—whose growth plans would be made or broken by changes to tax law, regulation, foreign policy, and exchange rates—significantly shape candidate nominations, electoral campaigns, and the careers of politicians. In a money-driven campaign and media system, these are the contributions that matter most.
Despite the revelatory nature of his archival findings to the theory of how electoral realignments happen, Ferguson’s prescient warnings of the deep decay of American party politics appeared to go unheaded by partisans ostensibly alarmed by the state of American democracy. As readers search for answers about how to interpret the 2024 US elections, Phenomenal World editors Tim Barker and Andrew Elrod reached out to Ferguson for a conversation about his thoughts on the recent campaigns. It has been edited for length and clarity.3
An interview with Thomas Ferguson
Andrew elrod: One thing that struck me about the 2024 election, and really about Democratic strategy since the 2022 midterms, was the degree to which the party seemed to be engineering a demobilizing operation.
Thomas ferguson: Let’s put it in very simple English. Joe Biden was the consensus candidate of the Democratic Party establishment in 2020 because he was the only one who was broadly acceptable within the Party, looked viable against Trump, and could hold off Sanders. His candidacy was strongly reminiscent of Paul von Hindenburg’s second run for president in the last days of the Weimar Republic, when everyone from liberal elements of big business to the Social Democrats united around the doddering octogenarian as the only candidate capable of defeating Hitler.
I like to start the discussion of recent American politics with the 2014 midterm elections, which I analyzed in a piece with Walter Dean Burnham. The big story in 2014 was the stupendous decline in voting turnout compared to the presidential election in 2012. The turnout drop off was the second largest ever in percentage terms. Only the 1942 decline was greater, because millions of voters were shipping out across the globe to serve in World War II. But in many states turnout in 2014 collapsed to astonishingly low levels, akin to those of the Federalist era (when property suffrage laws limited voting). Regional differences in turnout between the North and the South also pretty much closed up for the first time since perhaps 1872, when much of the former Confederacy was still under occupation by Union armies. But this wasn’t because Southern turnout arced upward. Of course voter turnout in the South had been slowly rising since the civil rights revolution of the 1960s, but what finally brought the regions to parity in 2014 was plunging northern and western turnout. California probably witnessed the lowest rates of voting since it came into the Republic, while Nevada, Utah, and other states hit true lows. Burnham and I concluded that this signaled voters were sick of the establishments of both parties—that real upheaval impended.
What we got were challenges from outside the normal political spectrum. Trump challenged from the right, Sanders from the left. The dramatic entrance of candidates who did not stand for business as usual started a process in which turnouts rose sharply with these outsiders pulling in lots of people on both sides.
In 2016, Hillary Clinton and the Democratic Party leadership would not deal with Sanders. They famously cut the Sanders movement out of everything. In 2020, with Trump in the White House, Sanders ran again and lost, but he did quite well and the rest of the party consolidated around Biden. Sanders was undeniably a major force in the party and his movement could not be ignored. Elizabeth Warren represented a somewhat similar force.
In contrast to 2016, Biden let Sanders and his movement into the campaign and then into a kind of power-sharing arrangement. Underneath all the discussion of investment approaches to politics that I’ve done is a basic model of American electoral politics in which elite conflict driven by industrial structure interacts with broader social conflicts. What was happening after 2014 was the political expression of people who were definitely not super rich in any way, shape, or form. You can see that very graphically in the paper that Paul Jorgensen, Jie Chen, and I did, where we show the percentages of cash coming from various size levels of contributors. There’s basically one guy who’s not getting any money from the super rich: Sanders. All the other candidates are. Trump has that peculiar barbell shape: he gets a lot of small money, but he gets enormous amounts of big money, too.
Biden thus came to power in 2021 in coalition with a serious, articulate progressive agenda. The bulk of the Democratic party didn’t like that: Pelosi and, for that matter, most of the Biden people were not wild about the Green New Deal.
But Democrats knew they had made a big mistake in 2009, when they came in and did the small stimulus. Everybody agreed they could not repeat that disaster. Even the financial community took the point—emblematic of this is a January 2021 paper by Robert Rubin, Peter Orszag, and Joseph Stiglitz. Basically, it says you need to go big on fiscal policy. But the understanding of the financial wing of the party was that this would be a temporary stimulus. I’m not saying this worked out because three guys agreed. The agreement reflected a current of thinking that was very strong—Rubin’s signature in particular is representative of that. The guiding idea was “let’s go big early and then taper it back.”
The result was a consensus to try to put a big package through. And that happened: the American Rescue Plan, which the Wall Street Journaljust the other week was denouncing quite mistakenly as the cause of inflation. At that point, Biden’s popularity was very high. But the program was rapidly cut back. To caricature this for clarity: for about two years, you had almost a European social welfare state briefly in the United States. You got all kinds of things that you should have—the stimulus allowed people to pay for doctor visits, cover essentials, and there was meaningful childcare assistance—and then suddenly you didn’t again. Nearly all of that was rolled back before the 2022 election. Not quite all of it, but most of it. And the administration pretty much gave up on Covid-19 and declared victory prematurely, as Phillip Alvelda, who led the DARPA project that helped develop the mRNA vaccine, has spelled out in damning detail.
Ae: Let’s talk about the Inflation Reduction Act—the culmination of these struggles in Washington that opened with the American Rescue Plan and intensified as inflation accelerated.
Tf: The killer problem for the climate politics part of the Biden agenda, in my opinion, occurred after the war had started in the Ukraine. The Russian invasion drove oil and liquefied natural gas prices to the moon. Suddenly liquefied natural gas (LNG) exports from the US looked really crucial to supplying the rest of the world. Large fossil fuel interests saw their opportunity and went on the offensive. You could see this as it was happening. The new view in the US foreign policy establishment was, “you know what? Domestic fossil fuel production is a great weapon in foreign policy. We can supply Europe with the energy they’re losing as we finance the war with Russia; in fact we can supply many parts of the world. Let’s not push out the natural gas or oil guys too fast.” And the Biden administration discovered you can garner campaign contributions from those folks. As we know, US drilling increased, not decreased under Biden.
Ae: You’re arguing that the rescue of the various green energy tax credits from the whole Build Back Better agenda in the spring of 2022—the green capital push—was also a way to give fossil fuel producers a stake in the Bidenomics coalition?
Tf: That’s exactly what happened, though the Democrats were never going to be as hospitable to oil and gas as the GOP, since they also represent the possibility of action on climate change. The key point is that oil and LNG forces were no longer being treated as pariahs anymore, but as a potentially important international economic resource for the United States, a view that was shared widely within big businesses and the foreign policy establishment. I’m only repeating judgements that are obvious in, for example, Jamie Dimon’s “Letter to Shareholders” in the J.P. Morgan Chase annual report.
Ae: How does the problem of inflation enter the political calculus here?
Tf: The inflation was principally a supply-side story. Covid-19 happens. You can’t get anything or go anywhere. There’s nobody able to work in many places. You’ve got hundreds of ships sitting off ports that can’t land. Almost everything grinds to a halt. It has nothing whatsoever to do with any government spending. When Servaas Storm and I worked through the spending statistics very carefully in the first of three papers we wrote on this, we showed that, in fact, the federal spending had trickled off to almost nothing by October 2021, while inflation went higher and higher, surging principally in response to the Ukraine war, but also to problems related to climate: droughts, wildfires, and intense storms hitting crop patterns and infrastructure. These interact with oil prices which also drive up food prices. That last point is shown beautifully in a separate paper by Carlotta Bremen and Servaas Storm.
In my opinion, the Biden people should have moved to quickly choke off general financial speculation in commodities. Not everyone agrees with me, but I think they could have done it. A former Commodities Future Trading Commissioner actually told me he thinks US regulators probably could have acted, though we agreed that coordination with the Europeans would have been much better. The administration could have at least made the point and asked Congress for the authority to do something.
If the authorities had gone back to the older, pre-deregulation rules where end users and producers of the product were the folks mostly allowed into these markets, you would have contained those big price spikes, and the stabilization would have spilled over onto food prices.
Ae: Can you say more about how the regulation of commodity futures contributed to inflation?
Tf: In the old, pre-deregulation days, you couldn’t get into those markets on the financial side, except with very severe limits. You had to be somebody who actually used the commodities in their products, or you had to be a primary producer trying to hedge. The Bush-era regulatory changes made a huge difference. You may remember when AIG went bust in September 2008 and Tim Geithner, Hank Paulson, and Ben Bernanke got the federal government to rescue it. The team administering AIG had to get rid of a huge pile of commodities. They sold it all off one afternoon. It was shocking. AIG had all kinds of things in there: crops, metals, you name it. World commodities took a hit. But what that showed is how much financial firms just go in and speculate in this stuff. This is a US, a European, and, indeed, a world problem.
But Biden’s top economic policymakers, in the National Economic Council and elsewhere, drew heavily from hedge funds, private equity, and other financial types—despite talk about all the labor people in the administration. They should have done something. They should also have moved much more vigorously on antitrust. This is partly the responsibility of the FTC, where Lina Khan was certainly willing, but she was just getting into the job and met with huge internal resistance. They could have put a lot more emphasis on antitrust earlier. They didn’t. The antitrust section of the Justice Department could also have moved much faster than it did. Now, the Biden antitrust record overall is pretty good, but they were slow when it really mattered, at the start of the inflation, with the reopening of the freight system. They should have jumped in with something like a World War II-type coordination system—to open those ports much faster.
Tim barker: Why was it that Biden was so relatively good on antitrust? How do we explain Lina Kahn?
Tf: That pick reflected, first of all, the Warren and Sanders wings of the party. That was the appointment that signaled to everybody instantly that they were going to be serious about this. There is also, though, a strong minority view even in Silicon Valley itself that the smaller startups are bled by the platform companies. You can see that today in the Vance wing of the Republican Party.
But unfortunately, the Biden people dragged their feet. They should have controlled “greedflation” and paid more attention earlier to algorithmic pricing. It’s crazy to me how many economists even from the left kept denying “greedflation.” It’s clear in the data.
The administration’s slow response to inflation turned into an ostrich policy. In 2024, this was politically disastrous. They just kept proclaiming themselves as the most labor friendly administration. Sometimes they said in history or sometimes since FDR. There were all these folks, David Autor, Paul Krugman, and Arindrajit Dube saying that real wages were rising. Servaas Storm and I have written three very detailed papers on this, and we have walked through the evidence, and we conclude that no, in general, wages were not rising. The very lowest wages rose a tiny amount, pretty plainly a response to much greater workplace hazards, and everybody else’s wages lagged behind inflation.
Even within the wage data, there’s something of an optical illusion: Hourly wages rise, but working hours are dropping a lot. Average weekly real earnings are falling. No matter how you do it, most people are not keeping pace. As of our most recent paper, the overall loss is about 3 percent. Now the numbers in real wages were getting better over the course of 2024, and so that number might change slightly, though not by much. The fact is as we said, inflation’s decline without a recession came mainly from restored supply chains, some delayed expansion on the supply side, and a loss of widely distributed purchasing power—a fall in American real wages.
What was happening to people’s wages and incomes would have been much clearer if analysts would have stopped confusing people with statistics about hourly wages and simply focused on household median real income, where the numbers have been obviously disastrous if very slow in coming.
Almost everybody knew this, intuitively, when they went into a food store to buy anything at all. For the Democrats to keep parroting their “we’re the most pro-worker administration ever” line in 2024 was suicidal, even if their appointments to the National Labor Relations Board were truly labor friendly and had key impacts on specific campaigns. All the numbers for 2024 are not yet in, but the net change in the percentage of the workforce unionized during the entire Biden presidency is going to be either zero or very close to that.
In the election debates, it did not help that Democratic economists kept ignoring the actual record of the first Trump administration. Trump sharply criticized the Fed for prematurely hiking interest rates. Wages barely rose during his first term—leading to increasing doubts about the Phillips curve—but working hours went way up. Accordingly, the median household income figures rose a lot. Democratic economists were not wrong to note that the tax code and deregulation measures tilted heavily in favor of the rich, but many just ignored the short-run income rises that benefitted everyone, including minority groups, substantially. The number of pages in the media over the last two years pushing weird theories about why people didn’t appreciate that they’d never had it so good was a vast diversion.
Tb: Some people recognized the “greedflation” problem. Lael Brainard was one of the most outspoken about this, and the administration even tried to do a little jawboning.
Tf: When Brainard was still on the Fed board, she was often the most reasonable person in the published meeting minutes. Voters had a much better understanding of these issues than the media discussion. The truth is that while you have many Democrats saying people are stupid, it was the elites that were stupid. It’s really a case of that saying: You can fool all the people some of the time, and some of the people all of the time, but you can’t fool all the people all of the time. The Democratic campaign found that out. Telling everyone that American democracy itself will end if you don’t vote them back into power after you’ve steadily lost purchasing power on their watch was just not going to cut it.
ae: Was there any contingency at all in 2024? Some argue that no matter what campaign the Democrats ran, they would have lost. The outcome was overdetermined—not because of the administration’s conservatism, but because inflation was global and so was the anti-incumbent wave of elections.
Others say that the Harris-Walz people actively ran a conservative campaign that failed to differentiate from the incumbent, and repudiated key parts of their base, very openly, intransigently, and as a result they were punished at the polls. Do you side with one or the other of those explanations?
tf: People knew their real earnings were declining. That was, in my opinion, fatal in the absence of a more dramatic break with Biden. The inflation situation defined the “Macroeconomics of the Second Coming” of Trump. What was crazy is the resistance in the media, the New York Times, the Washington Post, and elsewhere to this rather obvious point. I spoke with various economics writers in some of those publications, who had some idea of what was happening, but they were afraid to touch it. People talk about the fragmented media context—what we really have is media balkanization with overarching partisan divisions, and almost everybody, including bloggers, takes their cues either from some party or party-related apparatus. Critical assessments of the wage data just did not get published. Ditto for the closely related issue that we kept documenting: that wealth effects from the Fed’s quantitative easing were also a major factor in driving inflation on, too. Only now are the Fed and the IMF publishing studies that recognize this.
But Harris and Walz did not break with Biden, not even respectfully, not even implicitly. Instead, they told everyone to be joyful. They were extrapolating from the outpouring of joy when Biden finally pulled out, which was real, but then they failed to articulate anything different, except an empty emphasis on “opportunity.” Let’s forget the campaign’s ridiculous appeal to crypto as an opportunity for black males—the whole package was fairly vacuous and it went over like a lead balloon with real people almost regardless of race or ethnicity.
I do think there were ways the Democrats could have won the election. Their situation was rather like Truman’s in 1948, when he had presided over high inflation and was down in the polls. He solved that problem with an assist from a major oil company that came up with money for the famous “whistle stop” train campaign that took him around the country to meet with Americans. Now, he didn’t repudiate himself—he ran against the “do nothing” Republicans in Congress and narrowly won. Biden’s Hindenburg strategy, of course, made that kind of strategy difficult, since it was premised on pulling in as much of big business as possible against Trump and attracting as many big donors as possible—including Republicans. Harris and Walz persisted in that path, and even more aggressively courted elusive moderate Republicans, but they could have drawn much clearer lines on Social Security, which they barely mentioned, medical care and public health, or even—imagine this—strongly defended Lina Khan and her impact on Americans instead of parading around with her critics. The campaign could have simply said it would fix the problems already identified in Congressional hearings with health care companies denying medical coverage to policyholders. People are desperate and very angry, as the murder case in Manhattan illustrates, but healthcare all but vanished from the front-page political agenda since the epoch-defining pandemic.
Instead, they talked up ideas for controlling “greedflation” in grocery prices—one sector from which they knew they could hardly hope to attract campaign contributions. I’m convinced most voters saw right through the thin proposed remedies—if they were even aware of them—but we can wait for serious post-election survey data to make sure. The campaign’s concentration on Republicans and donors who mostly wanted nothing to do with such subjects is obvious.
Political science struggles to account for the overwhelming influence of big donors on our elections. In 2016, the mainstream social scientific consensus ascribed Trump’s victory to racism and sexism, brushing aside very sharp evidence that voters did not see significant differences between the parties on other issues, and in particular the economy. Or they told us fables about how “professionals” ran the party—a theme that has reemerged this month in claims of a supposed NGO “groups”-driven leftward drift in the party—instead of major donors.
tb: In that connection, I have to ask about crypto, which is by some accounts the largest corporate sector intervening in this election, and one that seems to have a big influence operation in the media.
tf: My colleagues and I are writing a piece on crypto. When we started, we were focusing on its inroads in the Democratic Party because only one Republican in the House voted against a major piece of proposed legislation to regulate the sector. There’s no variation on that side, which gives little space to model anything, so we were very interested in which Democrats were and were not voting against the industry. But crypto is probably not the biggest sector in campaign contributions. Oil, gas, finance, and technology—the high-tech firms, too—are the much bigger story. The big numbers you see rest on amalgamating all of tech with crypto.
There are serious problems with existing coverage of political money. My colleagues and I “roll our own” data, as it were, pulling it straight in from the Federal Election Commission (FEC) ourselves and sometimes the IRS. What we find in our accounting usually differs from what journalists and many scholars claim, sometimes dramatically. In the piece we wrote on Sam Bankman-Fried and FTX, for example, we immediately found tens of millions of dollars more than other journalists were reporting at the time.
Yes, the crypto people are big. But I doubt very much that their campaign spending is unique. The real story you want to concentrate on with crypto, I think, is financial stability and transparency. Financial stability and “know your customer” rules are actually organically connected; when you don’t know what claimed assets really represent and you can’t ascertain that, you are asking for trouble. Comparisons of the huge rise in crypto recently with Tulip Mania are a bit unfair; the flowers at least had real decorative uses. No heavy hand of any government caused the crypto collapse during Covid. It is intrinsic to the phenomenon. Tech fixes that are supposed to guarantee stability in stablecoins failed; those things stay stable to the extent they have an outside guarantor. The big question is how much the banking system will become an appendage of crypto.
A lot of political money data is also still unexplored. There are vast inflows into state political machines that are not in the FEC, and can only be found in the IRS numbers. Meanwhile, the IRS has been retiring many of the reports and been very slow publishing recent ones, so it’s mostly terra incognita in need of serious research. And news outlets—the New York Times, Bloomberg, and other folks—pour lots of money into polling, but devote little attention to analyzing political contributions, beyond making lists of billionaires.
The sad fact is that even right after the reforms that came out of the 2008 financial crisis, Congress had real trouble standing up to finance interests. We know now that US Congressional elections are linear functions of money and careful tests show that that is not principally because money is following votes, but rather the reverse. You can actually watch gambling odds on the new prediction markets change as money pours in sometimes. It does not help that the leaders of neither political party want to regulate political money or their own stock transactions in any serious fashion. Or that so many of them, their aides, and their children and spouses shamelessly turn into lobbyists at the first opportunity.
ae: What does the evolving industrial structure and the investment theory of parties explain about the current political landscape? As a theory of historical explanation, your work has shown how business polarization in moments of changing industrial structure has in the past led to moments of realignment. Yet over the past four decades or so, there seems to have been a prolonged decay and failure of realignment to occur. What kind of period are we living through? Where is the industrial structure headed? Is business polarized? Why is a realignment failing every four years?
tf: I’m cautious about this, especially now because my colleagues and I are still doing the data for 2024 and I’m a believer that if you don’t have access to archival data, you can study public statements, but they’re imperfect evidence.
In the old paper that Jie Chen and I published back in 2005 in the Journal of the Historical Society on realignments we found the last New Deal election was probably 1968. At that point, we enter a new political era. We are planning to redo that paper, because time series statistics have developed a lot and there’s a lot more data. But I think it is safe to say that the period after 1968 wasn’t as Republican-dominated as is often said, since the Democrats held the Congress through into the 1990s. But I would say this: that period was pretty plainly one in which organized labor declined steadily. If you want a simple index, just take the percentage of the workforce that’s unionized and watch it, and it goes down, down, down, down. Particularly in the private sector now, it’s microscopic at about 6 percent. That’s a real realignment, I think, from the perspective of investment theory.
Today, we see that the wealth effect that resulted from the Fed’s quantitative easing policies, especially after 2020, had a major political implication. The enormous boom in financial and housing wealth accrues principally to the top income brackets. What this means is that even discounting inflation, the weight of the billionaire and near-billionaire groups has greatly increased. You just see this simply by counting billionaires who can’t qualify to make the Forbes 400. It’s remarkable: there are now almost as many billionaires who don’t qualify for the Forbes list as there are on it.
Large chunks of the economy are restructuring around this redivision of income. Politics is an integral part of that. I find reporters are increasingly comfortable writing up whatever billionaires have to say without including criticisms. For example, Kamala Harris brought a large number of billionaires into the campaign. Reid Hoffman actually said something to the effect that “I’m going to take her around and support her, but we have to get Lina Khan out of there.” What counts as acceptable behavior is changing a lot, because the safeguards that used to be in the system are gone.
Now that brings me to one of my favorite points. In my book on the investment theory of parties, Golden Rule, I had an Appendix on what I called the “black hole theorem” of the press. If you’ve got a for-profit press dominant, there’s all kinds of things they will not print, because it will hurt their owners’ interests if they do. Daniel Chomsky has published several excellent papers using the archival collections of publishers and editors of major papers that show how this works. But this year you could see the devastating impact of what you might call the “loss function” of excluded information from the for-profit news coming right up front. At the Washington Post and the Los Angeles Times, the owners just intervened and said “we’re not going to endorse anybody.” This is not an autocratic aberration, it stems from the development and consolidation of profit-oriented markets for information.
The consequences in the blogosphere are not edifying either. Various tabulations are around of how many so-called influencers are active that don’t fit into mainstream media, but the crucial point is that this influencer culture is permeated by a money-driven, product-selling logic. The apparent multiplication of media that’s supposed to be small and uninfluenced by money is an illusion. There’s a kind of Jacksonian-press efflorescence of outlets, but not real qualitative variety. When printing underwent technical innovations in the early nineteenth century, what you actually saw were all kinds of folks subsidizing small papers, either directly or indirectly. Larry Goodwyn made the point crystal clear in his memorable study of Populism, too. Then as now, the parties, the White House, and media elites collaborate on standard narratives which are retailed around. I use the term carefully—this is done over email and through teleconferences of influencers. They believe they’re getting inside information when in fact they are just getting the party line. As Goodwyn said, a big reason for the Populists’ relative success was that they had a press of their own.
tb: There’s almost a sort of neo-Sunbelt shift, right? Elon Musk has moved to Texas. Texas and Florida seem poised to expand even further their share of the population and the Electoral College.
tf: Fair enough, but the biggest state for data centers is Virginia. And the Northeast is not full of people clamoring to increase unionization in biotech or other high-tech enterprises.
The advent of private equity makes a big difference. They are not simply hedge funds or passive asset managers. They actively manage companies. They’re usually harshly anti-union. The spread of private equity into the rest of the industrial structure has been very marked. But that whole area of financial control of non-financial companies needs more analysis.
tb: In 2020, there was private equity money on both sides.
tf: But the big players were for Trump as my colleagues and I showed in detail. It was the same thing in 2016, and I am sure that’s going to come out in 2024 too. The really big private equity firms are mostly heavily Republican.
Look, when you don’t have the data, you don’t have the data. People who are reporting on the 2024 election now are using stuff that came out in October. End of the election stuff with the FEC has yet to appear.
What my colleagues and I find repeatedly is all kinds of people using different forms of their name and their employers. I started doing this by hand in the ‘80s and ‘90s on data that would be printed out for me and alphabetized by friendly FEC folks, all of whom have left that agency. Name variations and affiliations cause lots of problems. My favorite, one I remember clear as a bell, is a guy who claimed he had no business attachment whatsoever. He was actually the chairman of the largest health insurer in the United States. But he just listed himself as retired.
Jorgenson, Chen, and I wrote a paper on the 2012 election in which we spelled out a lot of these data problems. They have not been fixed by the FEC or others. The industry assignments are not super reliable. An antitrust lawyer told me the blunt truth, which was that the firms often don’t put the correct classification numbers down because they want to do mergers or stay out of an antitrust suit. Also lower-level folks sometimes just fill out these forms with what they reported last year.
I’ve always thought the heart of realignment was the reconfiguration of the industrial base—in other words, the people paying. When those figures change, the system changes. And they will then help reconstruct the system from the top down, just like the Texas oil guys I wrote about in the New Deal.
For realignment to occur, you need a government that really wants to restructure the system, solidify new configurations, and bring forward more radical demands. We may see that come January. You know you’re not in Kansas anymore when Dr. Oz is nominated to be in charge of Medicare.
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