Plano Real – the fake coin holders

Image: Mike van Schoonderwalt


Article published on the occasion of the launch of FHC's economic plan, in July 1994

“After all, you have to admit, my dear, that there are people who feel the need to act against their own interests…”
(André Gide).

“It is important for a 'technopol' to win the next election to continue implementing its agenda and not to remain in office. Winning an election by abandoning his positions is a Pyrrhic victory for him.”
(John Williamson).


Between the 14th and 16th of January 1993, the Institute for International Economics, highlighted "think tanks” from Washington, led by Fred Bergsten, brought together around one hundred experts around the document written by John Williamson, “In Search of a Manual for Technopols” (In Search of a Handbook of 'Technopoliticians'), in an international seminar whose theme was: “The Political Economy of Policy Reform” (The Economic Policy of Political Reform).

During two days of debates, government executives, multilateral banks and private companies, together with some academics, discussed with representatives from 11 countries in Asia, Africa and Latin America “the most favorable circumstances and rules of action that could help a 'technopol' to obtain the political support that would allow it to successfully carry out” the program of economic stabilization and reform, which Williamson himself, a few years earlier, had called “Washington Consensus” (Washington Consensus).

A single plan for the adjustment of peripheral economies, approved today by the IMF and the Bird in more than 60 countries around the world. Strategy of homogenization of national economic policies operated in some cases, as in much of Africa (starting with Somalia in the early 1980s), directly by those banks' own technicians; in others, for example in Bolivia, Poland and even in Russia until recently, with the help of North American university economists; and, finally, in countries with more structured bureaucratic bodies, which Williamson called “technopols“: economists capable of adding to the perfect management of their “mainstream” (evidently neoclassical and orthodox) to the political capacity to implement in their countries the same agenda and the same policies of the “Consensus”, as is or was the case, for example, of Aspe and Salinas in Mexico, of Cavallo in Argentina, of Yegor Gaidar in Russia, Lee Teng-hui in Taiwan, Manmohan Singh in India, or even Turgut Ozal in Turkey and, despite everything, Zélia and Kandir in Brazil.

A sequential program or strategy in three phases: the first dedicated to macroeconomic stabilization, with a primary fiscal surplus as an absolute priority, invariably involving the review of intergovernmental fiscal relations and the restructuring of public pension systems; the second, dedicated to what the World Bank has been calling “structural reforms”: financial and commercial liberalization, market deregulation, and privatization of state-owned companies; and the third stage, defined as the resumption of investments and economic growth.


It was still in the 1980s that the repeated failure of monetarist stabilization policies introduced into economic debates the crucial importance for success in the anti-inflationary fight of the “credibility factor”, and had as a consequence the canonization of a heterodoxy, that of exchange rate re-regulation. or “dollarization”. Soon ahead, in the 1990s, new pessimistic assessments, both from the IMF and the Bird, highlighted the decisive importance of the “political power factor” in the success or failure of their economic program.

This new concern of the intellectuals and managers of the Washington Consensus is what explains not only the holding of the Bergsten and Williamson Seminar, but also the presence in it of two political scientists, Joan Nelson and Stephan Haggard, responsible for one of the most comprehensive comparative studies ever carried out. on this subject in the United States.

In his introductory document, Williamson summarizes the central questions and hypotheses regarding the difficulties inherent to each of the plan's stages and the alternative responses found by different countries. Because he recognizes the perverse social and economic effects of austerity and liberalization measures on national economies and populations, the author also understands, with this program, how difficult it is to elect and sustain a minimally stable government. From where emerged various political tactics or artifices capable of making voters accept the social disasters caused everywhere by the neoliberal program as being transitory or necessary in the name of a greater, long-term good.

The most favorable conditions are listed there when the program can be expanded after some major catastrophe (war or hyperinflation) capable of undermining any and all resistance; When the "technopols” manage to face a discredited or disorganized opposition; when, in addition, they have strong leadership capable of “insularizing” them in relation to social demands.

Conditions that did not, however, in all known situations, preclude the prior formation of a power coalition strong enough to take advantage of favorable conditions and assume, for a long period of time, control of governments supported by solid parliamentary majorities. This, indeed, is a condition considered indispensable to be able to transmit “credibility” to the actors that really matter, in this case: the “risk analysts” of large financial consultancy companies, ultimately responsible for the direction in which capital moves. “globalized”.


Few still have any doubts that the Real Plan, despite its operational originality, is part of the large family of stabilization plans discussed at the Washington meeting, where Brazil was represented by former minister Bresser Pereira. And this is not only because it was formulated by a paradigmatic group of “technopols“, but because of its long-term strategic conception, announced by its authors, from the very beginning, as an inseparable condition of its success in the short term: fiscal adjustment, monetary reform, liberalizing reforms, privatization, etc., so that only after Once an open market economy is restored, growth can then resume.

In this sense, their “technopols“, as good apprentices, they know that the initial dollarization of the economy will always be an innocuous artifice if it is not ensured by unalterable power conditions for a prolonged period of time.

From this point of view, in fact, the Real Plan was not designed to elect FHC, it was FHC that was designed to make viable in Brazil the power coalition capable of giving support and permanence to the IMF's stabilization program, and giving political viability to the that the reforms recommended by the World Bank still need to be done.


Therefore, the popular confusion regarding FHC's candidacy and his synergetic relations with the Real Plan is not surprising. What is surprising, yes, is the even greater confusion that reigns among intellectuals who criticize or justify emotionally or ideologically their current political preferences.

A mistake that FHC, a professor, logical and realist, would not have made if he had not been prevented from resorting to himself and to what even better explains his current political preferences: his own essays on industrial business and the associated and dependent nature of Brazilian capitalism, dating back to the 1960s. They allow us to understand and follow in a perfectly rational way the logical path that led FHC to his current position in the Brazilian political-ideological chessboard. But it is true that, at the same time, they contain the harshest, most vehement and essential libel against their own option.

In very synthetic terms: (a) All of FHC's academic work can be defined as a tireless search for “scientific connections” between the interests and objectives designed by “historical-structural” situations and the possible paths that are being constructed politically in the concrete societies by social groups and their power coalitions.

(b) With this perspective, FHC was one of the pioneers to ruthlessly investigate and conclude, already in 1963, that “the national industrial bourgeoisie was prevented, for structural reasons, from playing the role that the national-populist ideology attributed to it ” and that, for this reason, “he had opted for order, that is, to give up once and for all trying to achieve full hegemony in society, satisfying himself with the status of a minor partner in Western capitalism.”

A finding that allowed him to rediscover very early on in the Brazilian business community a universal condition of capitalism: that it can be associated, indifferently, depending on the circumstances, with a protectionist or free-trade, statist or anti-statist ideological discourse, obeying only the greater interest the freedom of movement of capital and the geoeconomic and political consequences of its continued internationalization.

This discovery was directly responsible for his next and most original step: for FHC, if the peripheral condition of capitalism was defined by the absence of convertible currency and endogenous capacity for technological progress, its “dependent condition” was defined by the peculiar form of economic association and policy between national business and international capital and the State. Tripod of economic support for the phase of “internationalization of the internal market” (in which multinational companies took the lead in almost all cutting-edge sectors, accounting for around 40% of the industrial product) and a type of “associated industrialization ”, as viable as it is inevitable from the point of view of the “Brazilian industrial bourgeoisie.”

During the 1970s, FHC's intellectual work consisted of demonstrating that this “structural situation” did not impede economic growth nor necessarily associate it with a single social and political model. Concluding, right before entering political life, that the predatory, exclusionary and authoritarian character of Brazilian capitalism was the signature that the conservative power coalition had imprinted on the Brazilian developmental State.


It is not difficult to extend and update FHC's analysis to the new “structural situation”, defined by a more advanced or globalized internationalization of capitalism, associated with the increase in our internal “sensitivity” to changes in the world economy. Above all because the new reality goes beyond, but does not invalidate, what was essential to FHC's writing in the 1960s and 1970s. And his intelligence prevents him from repeating nonsense and allows him to know that what matters to Brazil in the new globalized context has nothing to do with it. to do with the fall of the Berlin Wall nor with the exhaustion of the import substitution model that had already occurred in the 60s/70s…

In this update, it is enough to be clear that globalization is not a completely apolitical process, involving increasing pressure from governments and multilateral organizations on the domestic management of peripheral economies since the 1980s. Therefore, national adjustments are not purely economic either. National states have to choose and decide how to connect to the new redefinition of internal and external coalitions of power.

In our case, the old economic tripod and its alliance with regional political elites has entered into crisis and needs to be redone. Of the former allies, the old political elite is regionally fragmented; the international partner “has become financialized”; The local business community, which has already “adjusted” at a microeconomic level, maintains its old option even when it has found its exact place as a “minor associated partner”, and for this reason it has already fully aligned itself with the anti-statist free exchangeism of the “Washington Consensus“; and, finally, the State, financially bankrupt, has already been destroyed in an absolutely irrational and ideological way by the Collor government.

FHC knows like no one else that changing or remaking this economic articulation and political alliance is the central problem facing the Brazilian scenario today. And, faced with this challenge, he made his first and decisive decision: he decided to follow the position of his old object of study, the Brazilian business community, and assumed the current international relations of power and dependence as an irrefutable fact. He abandoned his reformist idealism and remained with his analytical realism, abdicating the “scientific connections” to propose himself as a “condottiere” of his industrial bourgeoisie, capable of returning it to its manifest destiny as a minor partner and dependent on the same associated capitalism, renewed by third technological revolution and financial globalization.


As a natural consequence, it adhered to the IMF and World Bank adjustment strategy. But his most important option was not this. It had a list of political alternatives to implement this same strategy. But, faced with the hypothesis of a center-left alliance that could revolutionize the Brazilian political and social system, bringing it closer to the social-liberalism of Felipe González, FHC preferred the path of Oraxi, Vargas Llosa or Mitsotakis, and decided on a center-right alliance with the PFL that guarantees it the natural support of the other conservative parties in a possible second round. An alliance that, obviously, cannot be explained by purely electoral reasons, as after all Collor and Berlusconi have already demonstrated that in this field it is possible to obtain better results through more direct and “modern” paths.

What FHC's new alliance proposes, in fact, is something more serious and definitive: reassembling the traditional coalition in which conservative power in Brazil was sustained. This is the true right-wing meaning of his decision which, by the way, is not recent, but dates back to May 1991, when he supported the reorganization of the Collor government in alliance with ACM and Bornhausen's own PFL.

If he was unsuccessful there, it was due to fate or Mário Covas, but the cards were already in place. Since then, he has brilliantly and efficiently secured the support of almost the entire mainstream press and business community, but above all the international support that Collor lacked, considering, in addition to the risk assessments of major financial consultants published by the international press, the parade of global figures (public and private) of neoliberalism who have come to support FHC's stabilization and reform program. However, he still lacks two things: the support of the regional political leaders who have been negotiating with immense difficulty from the PFL and, above all, that of the voters that he intends to obtain through the instant success of his Real Plan.

In short, FHC chose to support the Washington Consensus strategy, using the same power coalition that built and destroyed the developmental state in an equally exclusionary and authoritarian way. And, with this, in the name of his realism, he is actually proposing, once again, to refound the economy without refounding the Brazilian State. And here, yes, it contradicts an essential point of its ideas and its reformist past.


We are not interested in discussing here why the IMF/Bird program can be virtuous for the business community and catastrophic for a continental and unequal country like Brazil, but only focusing on the internal and specific dilemmas of such a proposal, and its concrete experimentation, so as to clarify the most radical meaning of FHC’s option. But for this we must return briefly to Washington.

No longer to the practical suggestions of John Williamson's seminar, but to the conclusions of the comparative study by J. Nelson and S. Haggard, on a group of 25 countries that preceded Brazil in joining the “Washington Consensus”. And here all experiences point in the same direction: if the project does not move forward without “credibility”, there is no credibility possible without governments with strong, centralized authority. But why did they reach this conclusion that it was essential to resort to politics and strong States to achieve the “almost perfect market”?

Firstly, because in most countries that have already applied the policies and carried out the recommended reforms, there has not been the expected recovery in investments. And this is because, secondly, business support, internal and external, is nothing more than rhetorical enthusiasm for active cooperation, essential even for the first stage of stabilization without having guarantees regarding liberalizing reforms.

Thirdly, as a consequence, in fact, all countries that managed to overcome the stabilization stage relied on politically oriented external aid; in the Chilean case, 3% of GDP for five years, from public aid plus an equivalent contribution, for three years, from commercial banks; 5% of GDP for five years in the case of Bolivia; 2% of GDP for six years in the case of Mexico, etc.

But, fourthly, even when they obtained external aid and stabilized, these “reformed” economies went through deep recessions, significant losses in the wage bill and a geometric increase in unemployment, the famous “social costs” of stabilization.

Fifthly, even where growth has resumed, it has been slow and absolutely incapable of recovering the jobs destroyed by the restructuring and opening of economies. To culminate, sixthly, in the case of well-behaved experiences, the stabilization and reform stages took three to four years each, and up to a decade for the effective resumption of growth.

In this context, obviously, it is difficult to obtain credibility for neoliberal policies among the business community, its indispensable ally, and even worse, among workers. The inevitable conclusion follows: the long wait for the eventual positive results of the policies and reforms advocated by the IMF and Bird demands a prolonged stabilization of the power situation favorable to reforms. A solution that leads, however, to a new problem: that of the lasting electoral viability of the “reformist” coalition. That is the question: how can we make the people understand and support, for a long period of time, and despite their harsh punishment, the truth about the “technopols”? Or in more direct terms: under these conditions, how can we win elections and maintain a solid majority in the National Congress for so long?


Faced with this challenge, the “Menem alternative” (using one program for the electoral campaign and another in government) enthusiastically defended at the Washington seminar by Nicolas Barlette from International Center for Economic Growth, studies point to three known paths: (a) that of parties capable of ensuring victory and a parliamentary majority for more than a decade, which generally occurred in societies with lower rates of inflation and/or social inequality; (b) the existence of exceptional conditions, of war or democratic recovery, favorable to the achievement of social and political agreements between parties, unions and businesspeople; (c) or else, as the studies mentioned indicate in almost all cases of countries with economies of high inflation, great external fragility and extreme social inequality, the appeal to permanent or “surgical” authoritarian regimes, as was the case in Turkey in early 1980s and Peru more recently.


FHC, since 1991 at least, has clearly opted for this neoliberal modernization project and a center-right support bloc. In this sense, according to experience, it opted for a socioeconomic strategy that has generated or deepened pre-existing levels of inequality and social exclusion. And in addition, to top it all off, it also chose to carry out this anti-social and almost always authoritarian project, through a political coalition that was always authoritarian and that already managed to forge, before and during the developmental era, this society of ours that occupies today the penultimate place in the world in terms of income concentration.

In this sense, it is possible to conclude, without offending logic, that FHC really joined a project of “updating” from the anti-social authoritarianism of our elites.


But now the game has started and things have evolved. Today, FHC has become a hostage of his own “technopols“. As his neo-liberal proposal satisfies the business community but leaves little room for forming alliances with the old regional political elites, and as the situation of voters has worsened enormously since he took over the Ministry of Finance, he can only wait for the miracle of the three months promised by the heads “enlightened” from his economic team.

At this point, in fact, Brazil produces something new that could perhaps be reported at the next seminar in Washington: instead of remaining silent about the perverse effects of the program, it turns its anticipated success in the very short term into a great weapon to obtain electoral victory. … But this is also why in this case the stabilization plan was already born in an authoritarian way, in such a way that, from now on, its management is independent of the known public sense of Minister Ricupero.

Launched in an electoral period when, by definition, choices are free and results indeterminate, the pre-announced success of the Plan assumes that there can only be one winner, or worse, assumes that, whoever the winner is, will have to submit to the "technopols“, unless you want to face explicit hyperinflation, with capital flight, exchange rate overvaluation and fiscal imbalance generated by high interest rates.

Not to mention that, in these three months of deception, everything that is a normal part of an electoral campaign will be considered subversive from the Plan's point of view... It is unnecessary to add, at this point, that even if FHC wins the elections it will be difficult for him to have a parliamentary majority that they speak of, which strongly suggests that, according to reported experience, we can prolong the originally authoritarian conception of the Plan over time.

In this sense, contrary to what some argue, FHC is giving a new and sophisticated collaboration to the irrationality of Brazilian politics.


And as for the currency that is born, after arriving in Brasília protected by Army tanks, it will continue to be a virtual currency anchored in an exchange rate parity, which, in turn, is linked to a political future that is impossible to be assured in advance. We would be lucky in this sense if we could just paraphrase Helmut Schmidt (when he said here in Brazil, commenting on the possibility of immediate success of liberal reforms in Eastern Europe): “You would have to be a Harvard professor to believe in this nonsense”. Our situation is even sadder, because we have to recognize that our “technopols” manage to combine the irresponsibility of André Gide’s fake coin purveyors with the “folly of Harvard professors”.

* Jose Luis Fiori He is professor emeritus at UFRJ. Author, among other books, of The fake coin holders (Vozes).

Originally published in the newspaper Folha de S. Paul, notebook most! on July 3, 1994.

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