Lula repeats recipe with uncertain result for the left – 10/21/2023 – Power

Until now, President Lula’s (PT) government has been repeating part of the leftist recipe that reduced inequality in Latin America during the so-called pink wave of the late 1990s and early 2000s.

The sustainability of the measures amid budgetary tightening and a more unfavorable international scenario than before, however, is uncertain.

The pink wave was the nickname given to the period that concentrated left-wing governments in Latin America. In 2009, 11 of 17 countries in the region had a president from this ideological camp in power.

A recent study published in the journal Latin American Politics and Society showed that, in general, they managed to reduce income inequality faster than non-left administrations, regardless of the commodity boom.

The work is written by political scientist Germán Feierherd, from San Andrés University, in Argentina, and economists Patricio Larroulet, Wei Long and Nora Lustig, from Tulane University, in the United States.

Lustig is the author of another study, widely cited in academic literature, which showed that moderate-left governments in Brazil and Chile were more successful in reducing inequality than governments from other political camps or populist left-wing governments in the region.

In the current work, she and her colleagues used econometric methods to isolate the contribution of other factors related to the commodity boom at the time, such as trade volume, composition of the workforce, among others, from the result of inequality.

Data were analyzed between 1992 and 2017, before, during and after the departure of left-wing governments.

The conclusion was that, on average, countries with a leftist president had a drop in the Gini index, which measures inequality, 2.4 percentage points higher than the others. This improvement could reach 5.5 points in the event of a longer stay in power.

According to them, three measures adopted by the pink wave governments were decisive for this result: an increase in the minimum wage, an increase in tax collection and pensions with social criteria.

Actions like these have appeared again under the current Lula administration. The PT member announced the first real increase in the minimum wage in six years and sent to Congress a project that provides for a policy of readjustment based on inflation plus the variation in GDP (Gross Domestic Product) from two years earlier.

His administration is also trying to increase revenue, with a goal of obtaining R$168 billion in extra revenue, and announced an expansion of the Bolsa Família program.

Distributing income to the poorest without burdening the richest much more may have been a successful strategy before, from a social and political point of view, but there are currently more obstacles to replicating it.

For countries like Brazil and Argentina, which already have a high level of fiscal spending in relation to GDP, it will be difficult to rely on continuous increases in spending to redistribute income, says Feierherd.

In the Argentine case, in fact, he assesses that the expansion of spending during the Kirchner governments contributed decisively to the subsequent crisis in the country.

Both there and in Brazil, to reduce income inequality, says the political scientist, public spending will now need to be more efficient and more redistributive. Issues such as access to education, which are not the subject of the study, can also have an important effect.

The realization about the nature of spending leads to challenges in the political arena. This is because the Lula government managed to approve the Tax Reform, but proposals such as the taxation of offshore companies depend on negotiation with Congress, which arouses criticism from heterodox economists.

“This tax reform could also have been approved by the right, because it was already in the market’s interest”, says Maria de Lourdes Rollemberg Mollo, economics professor at UnB (University of Brasília).

For her, the reform itself is positive in simplifying the tax system, but the problem was separating its discussion from new direct taxation rules, that is, on income and assets — a flag more linked to the left.

The criticism adds to others from leftists about measures from Lula’s third term, such as the pursuit of zero fiscal deficit and the non-revocation of reforms such as labor and secondary education — although, in both cases, changes are planned in the sanctioned texts under Michel Temer (MDB) management.

For political scientist Alberto Carlos Almeida, pressure from the more radical left is positive for Lula, as it gives him greater bargaining power when negotiating with other ideological camps.

In other words, it would be positive for the president to appear more moderate than his own allies.

In the opinion of Almeida, who during Operation Lava Jato had telephone calls in which he gave advice to Lula revealed, it is very difficult for the more ideological left to give any letters. In his view, for two reasons: the president’s moderation and the fragility of the base more programmatically aligned with the PT member in Congress.

Therefore, he considers as natural the emphasis that the federal government has given to combating poverty and concessions to the center — not to be confused with the center, associated with Vice Geraldo Alckmin (PSB) or the Minister of Planning, Simone Tebet (MDB) .

“Broad front is a charming name, but what is important for the government now is to have a deputy’s vote,” he says.