Populists weaken important institutions for growth – 02/24/2023 – Marcos Mendes

The Covid pandemic gave Bolsonaro the chance to unite the country and reduce political polarization after the 2018 election. The virus was a common enemy, to be faced by all, regardless of political preferences. To minimize the damage, the government would work in favor of prevention norms, purchase of vaccines and everyone’s solidarity with those most affected. Bolsonaro preferred, however, to deepen the conflict, with the repulsive behavior that multiplied deaths.

The coup that invaded palaces on January 8 gave Lula the chance to reduce the political polarization after the 2022 election. The massive rejection of vandalism was the cue for him to gather the democratic forces and start a coalition government, moderate in the economy and reconstruction of the areas dismantled by Bolsonaro. Lula preferred, however, to deepen the conflict, with an angry speech against fiscal stability and the Central Bank, instigating social conflicts.

Bolsonaro wanted to rewrite history, calling the 1964 coup a revolution and denying legitimacy to the 2022 election. Lula wants to rewrite history, calling the impeachment a coup and denying the existence of the corruption that plagued PT governments.

Everyone has their favorite villains. Bolsonaro goes from Orbán, Ustra and Pinochet. Lula scales Fidel, Maduro and Ortega. Both handed over the Union Budget to low politics, with their inefficient and often corrupt parliamentary amendments.

They refused to do the difficult thing: negotiate well-founded public policies with Congress. Easier to form a parliamentary majority by handing out money.

Bolsonaro sought to weaken institutions throughout his term: the STF, the Electoral Justice, the State-owned Law, which did not allow him to intervene in Petrobras and fuel prices, Anvisa, which approved vaccines against his will, the spending cap, which didn’t let him spend as much as he wanted.

Lula took office seeking to weaken institutions: he threw the last shovel of earth at the spending ceiling, questions the inflation targeting regime, signals the undoing of reforms: Law of State-owned Companies, Law of Regulatory Agencies, regulation of basic sanitation, labor law, privatization of Eletrobras, Central Bank autonomy. He has already chosen his chloroquine: the reduction of the Selic rate.

Solid and respected institutions are fundamental for economic and social development. They prevent the ruler of the moment from abusing discretionary power to create temporary well-being at the expense of high future losses. Loose environmental control is more production today at the cost of more permanent environmental deterioration. A little inflation may allow for more growth today, but it results in higher inflation and lower growth for years to come. Cheap gas on election eve ends up in a broken state after the election.

Populists attack institutions in order to concentrate more power and blame them for unwanted results that affect popularity: “The economy will not grow because the Central Bank doesn’t allow it!”, “the president doesn’t lower the price of gasoline because the law doesn’t allow !”.

For fans on either side, the above comparisons are inconceivable. How to equate a democrat with a “genocidal fascist”? How can a good man be compared to a “communist convicted of corruption”?

The reality is that extremes serve us badly. Fortunately, we still have civil society and an open debate that manage to overcome passionate polarization and place limits on governments. Books about the military dictatorship (Elio Gaspari) and recent corruption (Malu Gaspar) prevent history from being rewritten. It is still possible to move forward with some important reforms, such as the tax one, and limit the dismantling of those that have already proved to be important for the country.

With this, we avoid plunging into an economic abyss and the loss of democracy. But, unfortunately, it is insufficient to overcome poverty and economic mediocrity. For this, we need to overcome polarization and increase social cohesion.

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