Explaining the Vinegar Revolt
What can explain Brazil’s escalating protests? According to official statistics, things have only gotten better for the average Brazilian over the last decade: 40 million people have moved into the middle classes, and nearly 28 million have emerged from extreme poverty. Grievances over an increase in bus fares sparked the protests, but they alone cannot possibly explain the scale and intensity of mobilisation.
The protests go beyond the quotidian challenges of Brazilians, such as corruption and poor quality social services. While a crisis of representation has always been part of the Brazilian political narrative, high taxation and poor returns have never been so flagrant. In essence, Brazil’s current crisis reflects an archetypal formula for revolt - high taxation with neither representation nor social returns.
A deficit of representation
A passing indicator of this crisis is the response of the political elite. President Dilma Rouseff, according to the accounts of fellow politicians, simply could not understand why street marches continued to escalate. After a historic week of protests, her wooden appeals to viewers this past Friday on national television seemed to communicate a lack of understanding and empathy, offering little in the way of concrete proposals.
Other politicians are more obviously out of touch. The President of the Lower House of Congress and several legislative leaders spent most of the week in Russia. While the protests grew in scope and violence, the much maligned National Congress got up to its usual trouble: the Lower House Committee on Human Rights even managed to approve a bill that would promote a “cure” to rid homosexuals of their “illness”.
The essence of Brazil’s crisis of representation has to do with a fragmented multiparty system in which national political programs come second to self-interest. A 26-party Congress vetoes or distorts meritorious presidential initiatives and has proven incapable of advancing important political and policy reforms.
To placate the 17 parties that form Rousseff’s coalition - each demanding a piece of the action - the President has increased her cabinet to 37 members this year (by comparison, the US cabinet consists of 15 parties). Just over a decade ago, under President Fernando Henrique Cardoso(1995-2002), the cabinet encompassed 24 ministers. The feeding frenzy of rent-seeking parties - at the federal, state, and municipal levels - is where much of middle class income disappears.
Highest tax-take in the hemisphere
When Brazil began its return to democracy in 1985, the country’s tax burden hovered around 25 percent of GDP, almost five percent more than the current Latin American average. Over the ensuing 25 years, it increased by more than ten percent and Brazil’s tax-take now topples countries such as Canada, whose citizens actually obtain a fair measure of value for their money. In return for their taxes, Brazil’s poor and middle classes receive pathetic public services, and pay consumer prices that visitors from rich countries struggle to fathom.
To their credit, the Workers’ Party has helped to bring an astounding number of people - mostly rural citizens of Brazil’s northeast - out of extreme poverty. However, Brazil is almost ninety per cent urban and the “the middle class” now constitutes more than 60 per cent of the population. As defined by the Brazilian government, the middle class begins with families who earn between R$1540 and R$2800 a month (approximately US$750 and US$1400) - a relatively poor ‘middle class’ that finds it increasingly difficult to make ends meet.
Brazilians are taking their grievances to the streets because they feel this is the only way they can be heard - traditional political parties simply do not represent the interests of the middle classes.
This segment of the population sees approximately a third of its income siphoned off by non-transparent and mostly regressive value-added taxes. On top of their taxes they pay for private schools for their kids, private medical care to avoid the horrors of the public health system, ever higher costs for poor quality public transportation, and nearly 7 per cent yearly inflation. In other words, they pay taxes on top of their taxes. As for the powder keg issue that led to protests, urban public transportation is generally run by private cartels in collusion with public officials - an emblem of what’s wrong with governance in Brazil.
High taxes and empty promises have imbued the middle classes with a keen sense that Brazil is losing a grand opportunity. High commodity prices over the last decade led to a rising economic tide, but it only extended to the realm of consumption, a drug whose effects have now worn off. Inflation continues to run ever higher and consumer debts are mounting. No meaningful political or tax reforms accompanied the “new Brazilian miracle”. Indeed, tax takes continue to beat historical records with each coming year.
Taxation without representation in Brazil has its roots in a political recruitment problem, not uncommon in the vast majority of democracies. This problem has resulted in corruption, incompetence, inefficiency and, in turn, poor governance writ large.
Instead of investing in critical infrastructures such as health and education, politicians have chosen big ticket projects such as stadiums, bullet trains and dams that promise personal and political financial advantages such as kickbacks and campaign finance donations, and votes from those who believe concrete, metal, and glass are proof of good governance. Meanwhile, the government’s public communication strategy has been to tell Brazilians how great things are, how far they’ve come and how great tomorrow will be. Even casual observers of Brazil have fallen for this deceptive narrative.
World cup, olympics and maladministration
This narrative has been carefully articulated and amplified with the arrival of the World Cup and Olympics on Brazilian soil. The Brazilians were told that the World Cup spending would bring long term benefits for cities. In 2007, the Minister of Sport said that no public money would be invested in stadium construction. New transportation lines would increase economic activity and foreign investment would flood into the country. Mega-events would benefit everyone, raising self-esteem and consolidating Brazil’s place as a global player.
However, once private investors realized that the state would have to finance everything, the old game continued: huge contracts for stadiums, transportation lines, airports, ports and roads were signed with little due process and even less public participation.
As ever, these costs have inflated in the lead up to the events. The public burden for World Cup stadia in 2009 stood at 4,411bn Reales (USD $1.96bn). A year before the World Cup it is 8,110bn (USD $3.6bn) and rising. Then comes the spending for the 2016 Olympics - this budget has not yet been released but will be at least 33bn (USD $14.7bn) and rising. To make matters worse, iconic public spaces such as Rio’s Maracana stadium have been closed for years, renovated with public money and then gifted to the private sector.
The public is then forced to bankroll the stadium operators’ profits through paying higher ticket prices for games, shows and spectacles. Those who cannot participate in this spectacle of consumption have taken to the streets, from which they have been expelled with violence. In the rush to meet deadlines and because mega-events weaken democratic structures, grave human rights violations in host cities are common.
Brazil’s get rich quick scheme allowed for most of its citizens to improve their lives materially, but at great cost to the average taxpayer. As symbolic and material expressions of Brazil’s ascension, the World Cup and Olympics should have been used as an opportunity to showcase the accomplishments ushered in by a period of sustained economic growth. Now there are millions of people on the streets pointing out how wrong it has gone. The money has been blown for yet another party to which the vast majority of Brazilians were not invited.
Brazilians are taking their grievances to the streets because they feel this is the only way they can be heard - traditional political parties simply do not represent the interests of the middle classes. The protest movement’s incoherent agenda does not weaken demands, but rather should indicate how much work yet has to be done. It is not accidental that these protests come at the same moment that a global television audience is watching football matches in stadiums underwritten by the Brazilian public.
Mega-events are excellent at focusing attention on their hosts, but not everything can be swept under the carpet fast enough. That the peaceful exercise of the democratic right to protest has been repeatedly met with police violence demonstrates the actual conditions of Brazilian democracy. We applaud the so-called Vinegar Revolt - and hope that this awakening will extend across all social segments as Brazilians undertake the difficult task of reconstructing their political culture and institutions.