Academic journal article World Review of Political Economy

The Politics of Financialization in Brazil

Academic journal article World Review of Political Economy

The Politics of Financialization in Brazil

Article excerpt

Introduction

The financial crisis that spread from the center of global capitalism in late 2008 propelled into debate some topics that seemed concealed from the public sphere. The idea that the economy should be regulated exclusively by market forces with a minimal role for the state had been widely affirmed worldwide. Nonetheless, markets are social constructions through which classes face each other, bearing both economic and political weapons. These weapons include ideologies, which, as such, may be substituted, depending on which classes emerge hegemonic from political and economic disputes. This was the case in the last two major phases of capitalism, which Przeworski (1998) associates with a switch of economic ideologies. From the mid-1930s until the mid-1970s, the dominant ideology affirmed that increasing consumer income stimulates growth. Since then, the dominant ideology has maintained that economic stimulus depends on increasing the income of savers. This has influenced states worldwide, which have moved a good portion of their efforts from demand-oriented toward savings-oriented economic policies.

With this shift, other ideologies forged in the recent past now also seem fragile, such as the idea that the economy is separate from other human spheres, in particular, politics. We see with increasing clarity that the overall economy, especially finance, has a political dimension, given that social conflict is inherent to it. The influence of financial markets goes beyond the process of resource allocation and has broad implications for the social, political, and cultural contexts, as well as connections with institutions like the state and the legal system (Harvey 2010; Preda 2007). Even financial crises and instabilities are rooted in political issues. Thus, the capital circulating in financial markets is part of, influences, and is shaped by contradictory social relations that go beyond strictly economic relations.

Countering the generally accepted notion that the neoliberal state has stepped back from its hitherto strong economic role, this article argues that the state has had a particularly strong and active role in both implementing and enforcing the neoliberal agenda. Many commentators have argued that the state has retracted from controlling the level of economic activity. Saad-Filho (2010), for instance, claims that under neoliberalism state capacity to allocate resources has been transferred to finance, that the latter has imposed discipline on the state, and that a way for the left to address this would be to support the takeover of the financial system by turning it into a public utility. Some even affirm that a supposed state retreat was the cause of the most recent crises. For Lapavitsas (2012, 5), a crisis like the one of 2008 "showed that untrammelled financial markets lead to disaster." However, this implies that the state is sufficiently independent of finance that it is able to control it. Other commentators, like Jessop (2010), though claiming the enduring importance of the state, stress that this became clearer when states were led to rescue the system after the 2008 financial bust.

All these positions are not totally incorrect, but my point is that the state has never refrained from playing a strong economic role. This argument is in no way in discordance with neoliberal practice, which does not comply with its anti-statist discourse. If "the main achievements of neo-liberalism have been redistributive rather than generative" (Harvey 2006, 43), it is not surprising that the most important redistributor throughout history, the state, has maintained its paramount importance to the economy. Financialization, which is one of the principal and most visible neoliberal constructions, is also a state-backed construction. Relying on the Brazilian case, the objective of this article is to show that the state has not refrained from intervening in the economy. To do so, I depict how a large portion of the financial market was built and developed through direct state action, which has continued to sustain financial markets. …

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