By CICERO ARAUJO*

The current Lula government seems to be stuck in a kind of modified version of “Stockholm syndrome”

1.

With Donald Trump's victory for the second time, the crisis of American democracy – and, by extension, of the entire democratic world – takes another turn of the screw.

We will have to wait for developments to understand the true scale of the disaster. But the candidate’s speeches throughout the campaign, together with the program drawn up by a foundation at his service, conveniently kept quiet until election day, are quite eloquent indications. So are the first appointments of secretaries and advisors, shortly after his victory was confirmed, where the intention to “correct” mistakes made during the first term is clear, at least in terms of strict loyalty to the boss. It's hard to resist the biomedical metaphor: compared to 2016, Donald Trump 2024 has become a superbug, for which the traditional antibiotics of democracy will no longer be of any use.

Among the latter, two of them are already mutilated from the outset. First, the Supreme Court, the main one among the so-called “countermajoritarian institutions”: its hyperconservative inclinations, reinforced during Donald Trump’s first administration, were not reversed in the subsequent period. Quite the opposite, judging by two of its most controversial measures, taken during Joe Biden’s administration (and, of course, without his knowledge): the reversal of the jurisprudence of Roe vs. Wade (1973), on the legality of abortion; and the incredible declaration of immunity of the acts of the president of the republic, as long as they are justified as pertinent to the exercise of his function, which in practice means a legal carte blanche for future authoritarian attacks, which no one doubts will come under Trump 2.

Second, Congress: from here one can expect some resistance from the opposition led by the Democratic Party – which, however, unlike Trump 1, no longer holds majority control of either house.

The tremendous fragility of the party now in opposition, revealed in the election, is in a way a reflection of a broader weakness, of what we could call “social opposition”. Much analysis will still need to be done to understand the reasons for the failure of Joe Biden’s government at the polls. This represented, in its own way, an attempt to reverse the neoliberal policies of previous decades, including those issued by Democratic presidents. But whatever judgment history may make of this attempt, the fact is that the verdict at the polls was not favorable.

It is worth noting that, even at the beginning of his administration, when he presented an ambitious package of economic and social measures, soon called “Bidenomics”, the president had to face resistance not only from the Republican Party — already dominated by Trumpist ranks — but also from his own party, forcing him to water down some of the most far-reaching measures in the social sphere. Despite this, Joe Biden sought to reconnect with the old Democratic bases rooted in the working classes, as evidenced by the support given to the unions and the industrial strikes that sprang up during his term.

The economy was activated almost to the point of full employment, wages grew; however, inflation, which peaked with the outbreak of the war in Ukraine in 2022, swallowed up some of these gains, even though it returned to low levels in the following two years. Many analysts consider this to have been an important factor in popular discontent with the government.

Progressive domestic policy, however, contrasted sharply with foreign policy: in this, Joe Biden's performance differed little from the nationalist turn initiated by Donald Trump, and aimed in particular at China. Even more discouraging was the preservation of the policy of unconditional support for Israel, at a time of enormous intensification of the conflict in the Middle East: the Hamas terrorist attack in October 2023, followed by the massacre of the Palestinian population in the Gaza Strip. This orientation must have cost many votes, or at least lost enthusiasm, from the social alliances forged, at the beginning of the term, by the left of the party; and it certainly made it impossible to attract voters of Arab origin, especially those concentrated in one of the so-called swing states.

Looking at the total numbers, it may seem that the Republican's victory was not a landslide: a narrow margin of around 1,5% of the popular vote. But its concrete effect was overwhelming: no one expected the match to be decided so quickly. Donald Trump won not only in the Electoral College, but also, as mentioned, in the popular vote – which lends him legitimacy beyond any doubt. Even though he holds the governorships of several states and a minority, but large, bench in Congress, the Democratic Party now finds itself adrift. And that is how it will likely remain until the wounds of defeat heal, perhaps finding a new direction.

They soul searching, however, will probably involve a tough internal struggle, as the so-called “progressive neoliberal” wing will try, taking advantage of the general perplexity, to recover the ground lost in the last four years – in fact, already partially recovered in the very conduct of Kamala Harris’s campaign. Clear signs in this sense were given, for example, in a series of half concessions that Kamala Harris made to the big technology companies, quite wary of the antitrust policy that Biden sought to implement in the re-empowered Federal Trade Commission. (As is known, this Commission, a few months before the start of the presidential race, had put the ineffable Google LCC in the spotlight.)

But the challenges and difficulties that the Democratic Party is going through, and will continue to go through, are a miniature mirror of the pain of a society plunged into a deep crisis of self-confidence and which, in search of an apparently more comfortable way out, hesitates to break once and for all with a social order that has left so many scars on its working population and, by extension, on the functioning of the democratic regime itself.

Donald Trump is the extremist and authoritarian version of this and, as such, will try, once again, to introduce a therapy that, even in the event of confusing content, will be applied with massive doses of violence, either as violence tout court, whether in the form of economic or social asphyxiation – both of which tend to weaken, if not dissolve, any attempt at opposition that goes beyond the institutional framework. It would be difficult enough to reorganize it if this social opposition had a clear direction to take; but it will in fact be much more difficult, given the disorientation that the electoral defeat has made evident.

2.

Mutatis mutandis, isn't that what is also happening in Brazil? Okay, Lula has a charisma that Joe Biden never had. But the popular approval rating for the president has its limits and, obviously, is strongly related to the performance of his government and the level of ideological polarization of the electorate. In his second term, the Lula government enjoyed over 80% popular approval (83% excellent and good according to DataFolha in December 2010); today, polls point to a ceiling of just over 30% (35% excellent and good according to DataFolha in December 2024).

The previous two terms operated under a fully functioning “coalition presidentialism,” which gave the head of the Executive Branch almost uncontested control over a qualified majority of the National Congress. Lula III, in contrast, can barely move in a political regime whose written and unwritten rules are rapidly changing: the least that can be said about it is that the president now has a more assertive and insubordinate Congress, wielding an agenda openly divergent from the one Lula presented as a candidate. In practice, this means that the president of the Republic is on an almost continuous tightrope.

The most drastic and visible effect of this situation is the relative loss of control that the head of the Executive Branch exercised over the public budget. In theory, this control is guaranteed by the Federal Constitution itself, which in its article 165 states that the initiative to propose the budget law annually is the exclusive prerogative of the Executive Branch.

However, since Jair Bolsonaro's presidential term, congressmen have found ways to partially subvert it, through the instrument of parliamentary amendments. If we exclude the parts of the budget already linked to the Constitution (health, education, social security), we will see that the percentage of the remaining amount now tied to amendments is not at all negligible, which gives an idea of ​​the shift that has occurred away from the old constitutional balance. In reality, the problem of loss of control over the budget has only not exploded since the beginning of the current term because, still at the end of 2022, Lula managed to negotiate the “Transition PEC”, which raised the government's spending cap.

But this is just one of the arms of the “pincers” that are putting pressure on and paralyzing the third PT term. The other, and in fact the most insidious and implacable, comes from outside the strictly institutional framework: the “captains” of the financial market. By virtue of their modus operandi, this represents a daily plebiscite for or against a government, duly reported in the major media outlets. It is clear that in Lula 1 and 2 its influence was already strong and obvious; however, after a somewhat turbulent beginning, the government and the market ended up finding a point of mutual accommodation. But in Lula 3 its agents decided, from the beginning, to set in motion a disposition that, without exaggeration, could be described as “a state of permanent rebellion”. In other words, a state averse to seeking accommodation.

If we want to get an idea of ​​what it means, we need only follow the progress of the agenda that was imposed at the beginning of the term, and that since then has never left the economic pages (if not the headlines) of the main media outlets: the infamous “cutting of expenses” in the budget. This happened despite the flexible and negotiating stance of the government, which, through its Finance Minister, decided to accept discussing it, not to accept it. in total, as this would lead to a complete abdication of its power to influence the direction of the economy, but precisely as a sign of willingness to find a middle ground.

Well then: despite, as we said, all of Minister Fernando Haddad's attempts in this direction – it should be noted that his “fiscal framework” was designed precisely for this purpose – and now that we are in the last half of his term, the fact that we continue to harp on the same old tune, without the slightest change, is clear confirmation that the financial market's protagonists have decided to double down, not accepting anything less than unconditional surrender at this stage.

Why is this happening now? Let us be allowed a brief digression.

The term “financial market” says little about what this agency actually represents today in terms of social power. There is no doubt that, throughout modern history, this power has always been around, since the early days of the construction of so-called “sovereign” nation states, with whom it has established a relationship of increasing interdependence. However, never with such visibility and, above all, never with such capacity to exert effective pressure on governments as it has achieved today.

But far from being the result of spontaneous growth, this unusual level of influence was achieved as a result of an impulse originating from the richest capitalist countries, under the leadership of the United States. In an attempt to resolve their own internal tensions, accumulated throughout the 1970s, the United States decided to promote the release of the financial power that was partially pent up in them.

By “liberation” we mean the ability of financial assets to circulate freely in this “no man’s land” that is interstate space and which, thanks to a tacit agreement between governments across almost the entire planet, has been allowed to enter and leave national borders more or less whenever its holders see fit, with minimal or virtually no restrictions. Over time, and already greatly enhanced by the incorporation of technological advances that have boosted its expansion, in the manner of a large global network that puts its most distant points in instant contact, an electronic “Cloud” carrying immense amounts of liquid capital began to travel across planetary space on a daily basis, in search of the best returns for its investments, and in the shortest possible timeframes.

Armed with various alarm instruments spread throughout all countries, alert to the slightest sign of a local threat to the maximization of its profits, this Cloud has found an extremely effective way of exerting continuous pressure on any and all competing social powers. Starting with the same actors who “back then” had promoted its establishment, that is, the governments of the national states. This is the nature of the daily plebiscite to which we referred above.

So, what are we talking about? We are simply talking about the core, the very nucleus of the neoliberal order. This, in crisis since the crash financial crisis of 2008, has since dragged on as best it could. A crisis, by the way, that began not due to an external factor that disrupted its normal functioning, but due to its own unlimited freedom and entangled nature. So that which makes the Cloud act in unison for its own benefit, this time led it to become completely entangled in the same self-destructive web, a kind of financial “black hole” that threatened to suck it from end to end into a single, potentially inescapable fracture.

A threat that was not confirmed, as we know, only due to the surgical intervention, right at the right time, of the national States, which, to a greater or lesser extent, depending on their firepower, decided to convert the immense, multi-trillion dollar default of the global financial circuit. This operation left an enormous negative and indelible stain on the legitimacy of the neoliberal order, but at the same time revealed all the blackmail power of the monster that it itself engendered throughout its entire validity: “either us, or the flood”.

There is little doubt that the Great Rescue saved the world from an economic catastrophe with unforeseeable consequences. However, by emptying the Cloud of its burdens and transferring them elsewhere, and by magically reestablishing almost the same freedom of movement as before – except for a few obstacles, created on the spur of the moment and quickly left behind – the initiative also made it possible for the order that still dominates us to survive.

Worse still: since then, many other rescue operations have been carried out and even routinely implemented through mechanisms of injection of digital money issued by the most powerful central banks. What we are going to say now may seem incredible, but it is probably by disguising part of this money of state origin, in the form of private financial funds, that those who press the buttons of the Cloud buy and sell daily, among other things, public debt securities issued… by the States!

A morbid survival, as we can see, since it is this that gives shelter to the current rise of the extreme right in almost all democratic countries. Not that the interests of both sides – of the Cloud and of this extreme right – are necessarily convergent. Perhaps they are in fact only in the countries situated at the lower levels of the international hierarchy, which, because of their past, could never aspire to what is the central motto of the extreme right in the global North – to be great again – simply because they never were. But for those for whom this aspiration makes some sense, one can doubt that convergence will persist beyond the current circumstances. In other words, a crucial uncertainty looms over it just ahead: would something like “neoliberalism in one country” be possible, instead of the globalized neoliberalism as we have known it so far?

What would become of the Cloud's power of free circulation if the planet were effectively taken over by the dynamics of geopolitical dispute between the most powerful states – which are now beginning to blow from within themselves, fueled by the already well-known chauvinism of the extreme right, the smoke of a possible eruption –, whose trademark has always been the demarcation of territories? That power would certainly be curtailed, but we cannot know in advance to what extent, and what new arrangements will have to be invented to fill the void that the new situation will leave.

Until that happens, we are immersed in a historical period that is somewhat intermediate and, for that very reason, full of paradox. For precisely when they see their original strength and legitimacy slipping through their fingers, the protagonists of the neoliberal order still in force are taking the trouble to extort as much as possible from the competing social powers – among which, especially, those that governments are capable of representing and bringing together. And they do so with much greater disinhibition towards second-tier nation states, precisely because they are less likely to produce a correspondingly counter-reaction.

The far right in these countries tends to take this impotence for granted, preferring the most blatant subservience to the opposite, making a tacit alliance with the captains of the financial market plausible. This is the likely reason for the enormous increase in pressure that the latter are now exerting on Lula's term: they want to extort state revenues to the point of collapse, knowing that they will have the support of a far right that is on the rise and capable of echoing its voices not only among the moneyed classes, but also among the working classes.

As for the governments of the first-tier states, the situation is much more diverse. In the richest and most powerful state on the planet in particular, under the Trump II administration, we can be certain of an unprecedented increase in authoritarianism, but, in relation to what is being discussed here, the dice have been thrown in the air in many directions, and will continue to be so until further notice.

3.

Having made the digression, let us return to the point at hand: the Lula III government. We had spoken of one of the arms of the clamp that is pressuring and paralyzing him – an assertive and unbridled National Congress – and perhaps now the nature and specific context of the other arm’s action (the Cloud) in this historical period has become a little clearer. Each in its own way, both are squeezing the government in what is the greatest expression of its maneuvering power: the public budget.

The way that is peculiar to Congress is public and notorious. Nuvem’s is undoubtedly much more vociferous, but its pressure points are much less visible, since the spotlight almost invariably turns to what used to be called the government’s “primary spending”: the tricky way that was found to separate the spending destined to pay the public debt service from everything else. The destination of this remainder, that is, the “primary spending”, and only this, is what is discussed when it comes to the much-vaunted “cutting of spending” in the federal budget.

This remainder is indirectly pressured by spending on debt servicing. According to calculations by the Central Bank itself, the recent (December 2024) 1% increase in the Selic rate is expected to cause public debt to grow by around R$50 billion over the course of a year. A few days before this decision, and after difficult negotiations within the government, the Ministry of Finance had announced a “fiscal effort” (cuts) of R$70 billion, along with a measure to exempt Brazilians earning up to R$5 from income tax – just over three minimum wages in current values.

Now, it is not difficult to conclude that much of this effort simply evaporated as soon as the interest rate increase was decided. Because the increase in financial expenditure ends up, in one way or another, contributing to the overall imbalance of public accounts, even if this is not recorded in the concept of primary expenditure. Since the Cloud interprets this imbalance as an increase in the risk of continuing to lend money to the government, the pinching is a kind of advance warning of a cornering situation: either spending is cut or interest rates will have to be raised again.

The recurring nature of this game is not exactly new. However, now, and due to the hypothesis we have already put forward, the pressure is applied at much shorter intervals, with much greater detail and a much smaller margin of tolerance – in short, with unprecedented intensity.

After Lula III was enthroned, it was widely claimed that this was the case because left-wing governments tend to be more lax in terms of spending control. It would therefore be a simple response from “animal spirits,” as Keynes would say, to their future expectations, combined with the desire to make as much money as possible in the short term, via an early increase in interest rates indexed to the public debt.

But after the same media outlets that convey their interests released a survey among traders from the green-and-yellow equivalent of Wall Street (the self-styled “Faria Lima”), indicating that the overwhelming majority, in a hypothetical electoral scenario, would prefer Jair Bolsonaro to Lula and even Fernando Haddad; and after we learned, also from the same outlets, that the news of Lula’s new hospitalization was accompanied, on the same day, by a sudden enthusiasm on the São Paulo Stock Exchange, with the right to a momentary reversal in the exchange rate and the stock market; after all this, we said, it is difficult to avoid the thought that this is no longer a question of “animal spirits” in a predictable, albeit deranged, search for profits, but of a much more sinister and conscious disposition to bring an end to a government. In other words, the Cloud has decided, in these parts, to assume the most grotesque and shameless form of ideological bias.

4.

Finally, what implications can be drawn from this analysis? The first is somewhat obvious, but it is worth explaining. Lula III runs a serious risk of derailment, if not now, then certainly in the very near future, because he is unable to escape the trap he has gotten himself into. As in previous terms, the PT president tried to find – but this time, definitively without success – an accommodating disposition of the two agencies examined here. Finding this disposition would have allowed the government, once the effects of the “Transition PEC” had been overcome, to have some control over the public budget. “Some control”, that is, the minimum necessary to fulfill the central promise of the term, which is to “put the poor in the budget”.

It may not seem like much, but it is actually almost everything. Therefore, if this simple wedge of his legitimacy is removed, we will face the serious risk of derailment mentioned above. Needless to say, what will become of the prospect of a Lula 4 or any other candidate who may serve as a replacement for the government bloc, in the event of a sharp drop in the current president's popularity: the fact is that no replacement for Lula has appeared so far, and most likely will not appear until 2026. Either the current mandate works, with Lula and everything else, or it's game over.

Game over, really? The question leads to the second implication of the analysis, which is difficult even to outline. Having reached the second half of the regular time, is it no longer possible to argue that Lula 3 is actually working, despite everything that has been said so far? Why not, if the economy has finally taken off, boosting even the industrial sector, with unemployment falling to levels not seen in a decade? And yet, in astonishing similarity to what has happened throughout Joe Biden's administration, the people, whether due to persistent inflation, which the official indices only register tepidly, or for some other reason always surrounded by controversy, remain refractory and ill-tempered.

Whatever the case, it will do the government little good to continue spending a huge portion of its increasingly scarce time and energy negotiating with those who have already given every indication that they do not want to negotiate. If the large number of hours spent in closed-door talks is any indicator, it is likely that the ministers and parliamentary leaders in charge of the government have already used their entire arsenal of tools to win over the majority of Congress, with uncertain results – sometimes good, but often also very bad. However, at least in this area the government can play that well-known game of ambiguity that, even if it is not in its favor, will not be openly against it either.

The problem, much bigger, lies in the other area, where we are in fact trapped in an endless plot that has only produced successive and increasing wear and tear. To remain just on the symbolic aspect, let us focus on the image of a Ministry of Finance that seems to have accomplished nothing more in the last two years than to do the math that could please a very small social group – let us say, those “1%” that in 2012 the movement Occupy Wall Street managed to expose himself to at least some disgrace – that, monopolizing the economic pages of a servile press, he managed to become a recognized interlocutor of the government.

And so he imposed the discussion of his agenda, but, as we have seen, without ever being satisfied with this obvious political gain. There were and are endless hours of negotiations inside and outside the government to cut a few billion here and a few billion there, while the interlocutor only “watches from the stands”, as they say, to finally declare, Urbi et orbi, that everything is below expectations. Then follows a new round of attempts and so on.

Meanwhile, what can the same Ministry of Finance say to “the rest”, that is, the, let’s say, “99%” of the Brazilian population? Very little. But yes, the recent exemption from income tax for those who earn up to R$5 was a very important move. However, even this was diluted in the agenda that continued to have the financial market as its central interlocutor. Having introduced, somewhat embarrassed, a point of its own agenda – the one that supposedly speaks to the his public – on someone else’s agenda, the issue was duly refracted by the interlocutor through whom the measure was announced; and with that the published result was, once again, “that the government does not show itself capable of controlling its spending”…

All in all, what we want to say is that Lula 3 seems to be stuck in a kind of modified version of “Stockholm syndrome”: it’s not that he identifies with his executioner, but in any case he’s chasing after an impossible partner (the bank), which has already confessed, without the slightest shadow of a doubt, that it doesn’t want him well; that it will do everything possible to hinder his reelection in 2026; and that, finally, he will only accept a deal in which he himself “gets in with his foot” and the other “with his ass”.

Meanwhile, that immense mass of dispossessed people who voted for him are waiting, increasingly impatiently, for the government to say, without any inhibition and without interposing people, to what extent and how it is, after all, executing the yours agenda. But if it really consists, as Lula likes to repeat, in “putting the poor in the budget”, he should fight, with all the strength he can muster, to ensure the part of the budget necessary to fulfill this promise.

We know that simply being willing to do so does not guarantee the result. The obstacles and opposing forces are immense: as this analysis itself has tried to show, Lula 3 is taking place in a context that is much less navigable than the previous terms. Therefore, more than ever, it is necessary to save your political “fuel” and spend it wisely where you have the greatest chance of winning the possible range of battles to be fought, avoiding the Pauline drama of “beating a dead horse”. Okay, it is not possible to choose all the battles; but some are possible.

And in these, the willingness to show clearly to which he came—that is, wielding his own agenda, without the spurious use of other people's agendas — even if it does not guarantee victory in advance, it is a necessary condition for it. Even if the most important victories end up not coming, and the reelection project does not succeed, the public to which this agenda is aimed will at least know why and for what if we fought. Which would already be very important even in the case of an unlikely peaceful victory. But even more so in the case of defeat: that is, if we want to prevent the social opposition needed to face what would come next from entering that stagnation and drift that is right now confusing its North American counterpart.

*Cicero Araujo is professor of political theory at FFLCH-USP. Author, among other books, of The form of the Republic: from the mixed constitution to the State (Martins Fontes).

Published in number 2 of volume 10 of Pink Magazine.

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