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 Revelations of widespread corruption in the upper reaches of the Workers Party government in Brazil are a crushing betrayal of all who believed the Party's promises and posturing. An early hint of scandal came a few months ago when a video tape emerged showing a Party official, Waldomiro Diniz, taking bribe money from a gambling kingpin.
Then Brazil's leading news magazine, Veja, released a video showing a top official in the postal service pocketing a payoff from a supplier (see it at http://www.umbrasilmelhor.com.br/txt/VIDEOPROPINA.html).
On June 17, President Lula da Silva's chief of staff and top political operative, José Dirceu, resigned amid revelations that the Workers Party was paying US$ 12,000 monthly stipends to buy the votes of Congressmen from other parties.
Within a few weeks, the President, Treasurer and Secretary-General of the Workers Party resigned in response to a reports of large monthly vote-buying payments to legislators in other parties.
This became known as the Super Check (mensalão) Scandal. There was also one case of money being smuggled onto an airplane in a family member's underwear. This became known as the Super Shorts (cuecão) or Captain Underpants Scandal.
It was only two and a half years ago that Luiz Inácio Lula da Silva's election as President of Brazil was a cause for national celebration. For the first time, a proletarian leftist had won an election and been allowed to take power.
The Workers Party was renowned for the dedication and high ethical standards of its activists, its strong base in the labor movement, and its internal democracy.
Lula da Silva's personal history was inspiring. Born in abject poverty in the northeast and abandoned by his father, he got an education, became a lathe mechanic, a union leader, and a key figure in the democracy movement that brokered Brazil's transition from military dictatorship.
Many hoped his election meant the country had turned a corner and might serve as an alternative to "neoliberalism" for the rest of Latin America.
The corruption revelations have demoralized many of the Workers Party's loyal supporters. César Benjamin, a writer, editor and long-term member of the Party's national directorate lamented that, "everything has turned melancholy and pathetic for one who, one day, dreamed of changing the country.
"We are present at the end of a cycle for the Brazilian left, a cycle which leaves no theoretical, political or moral legacy. It remains to be seen how and when the left will recompose itself. But however that may be, the Workers Party belongs to the past."
Cristovam Buarque, a Workers Party Senator, former Governor of Brasília and Minister of Education in Lula's cabinet, feared that the Party had lost its soul and was seeking power for its own sake.
Corruption is an old story in Brazil. President Fernando Collor de Mello resigned in 1992 when he was threatened with impeachment for massive payoffs from contractors. But Collor was an opportunist from the backward Northeast with ties to a corrupt state political machine.
The political establishment in Brazil's industrial South was glad to be rid of him. Lula da Silva and the Workers Party are rooted in the most advanced intellectual and political sectors in Brazil's wealthiest state, São Paulo. If they are no better than Collor de Mello and his crowd, it is hard to keep up hope.
The Workers Party's problems are deeper than the corruption scandal. Leftists in the Party have been disappointed by Lula's failure to move the country in a more socialist direction. For years, the Workers Party's stock in trade was attacking "neoliberalism."
Lula won the 2002 election by making smiling promises to develop a "new model" while carefully avoiding specifics that might upset any group of voters. His goals were exemplary: economic growth, an end to hunger, lessening inequality, and so on. But he never said exactly how he would accomplish them.
In the same campaign, Lula made a very explicit promise to keep up the payments on the country's debts, a promise that left precious little room for changes in government finances.
The prospect of Lula's election had frightened the people, in Brazil and abroad, who lend the government the money it needs to pay its bills. So the outgoing government of Fernando Henrique Cardoso got Lula da Silva and the other candidates in the Presidential election to sign a commitment approved by the International Monetary Fund.
Reassured by this agreement, the Fund supplied a $30 billion cushion to prevent panic. Thanks to this agreement, Brazil avoided the kind of crash Argentina had just gone through.
Because of this agreement, and his firm campaign promise to the Brazilian people, Lula was locked into to continuing most of Fernando Henrique Cardoso's financial policies when he took office. Many supporters hoped that this would only be temporary, until things settled down, and he could begin to implement the promised "new model."
But no one knew exactly what this meant because it was defined only by vague slogans such as "giving priority to social goals over economic ones" that are appealing rhetorically but have no explicit policy content. Voters were free to read whatever they wanted into them. This worked brilliantly for the election, but after taking power things had to be firmed up.
As decisions were taken, it became clear that Lula's planning and economic ministers intended to stick with Cardoso's model indefinitely. This meant giving priority to controlling inflation, opening the economy to world markets, cutting debt and interest rates, and using the private sector as the engine of economic growth. In short, all the things they had denounced for years as "neoliberal."
Lula was not above using nationalist rhetoric in his campaigns, but in talks to global policy makers he made it clear that he had no intention of cutting Brazil off from the global economy. As recently as July 13, 2005, he reaffirmed to a group of European leaders in Paris that "a country like Brazil does not have the option of living at the margin of global processes."
Despite the rhetoric, Lula and his team never intended to break with the "neoliberal" policies. What they wanted to do was to make these policies work better than they had under Cardoso. Most importantly, they wanted to accelerate the country's economic growth so they could fund social needs.
Cardoso's great accomplishment was to end the horrendous inflation that had burdened Brazil's poor, eating away the money they needed for subsistence. This did more to lessen hunger in Brazil than anything Lula da Silva has done.
Cardoso also continued the process of privatizing government industries and opening the country to world markets, policies that had been undertaken by previous governments. This was intended to give the country the possibility of growing rapidly, as China, India, Bangladesh, Chile and several other countries have done.
But Cardoso was much less successful in implementing a key part of his model, cutting less productive government spending to free resources for investment and economic growth.
This proved very difficult because of strong opposition from well organized public employees and other interest groups. Much of this opposition was mobilized and led by the Workers Party which had a strong base in the public employee unions.
Unable to cut spending or reform taxes as much as needed, and refusing to inflate the currency, Cardoso's only option was to keep borrowing money to pay the government's bills. This kept inflation down, an unprecedented accomplishment for a modern Brazilian government.
But government borrowing forced interest rates up and drained capital that might have gone into productive investments. Brazilian interest rates became the highest in the world and the debt kept increasing.
The Workers Party's economic team believed that the way to economic growth was to cut less productive government spending, lower interest rates, and channel investments into productive private industries.
The Lula da Silva government acted vigorously on this analysis, becoming more strict than the Cardoso government had been about cutting spending and paying debts. A few of the leftist Workers Party leaders resigned in dismay, but most seemed reconciled to the argument that a party has to give up its less realistic visions when it faces the responsibility of governing.
Lula da Silva stated as much, observing that ''when God created human beings, he made the head round so that ideas can circulate. We can change our minds every now and then. I've had to adjust to reality and work on the basis of that reality and not my aspirations."
As his policies became clear, Lula da Silva's presidency came to be known as "Fernando Henrique Cardoso's third term," mostly by people who thought this was a bad thing. It was considered to be bad because economic growth had been erratic under Cardoso and unemployment had been too high, largely due to high interest rates.
Lula and the Workers Party need to make the "third term" more successful than the first two, especially in terms of economic growth. To do this, they had to do what Cardoso had been unable to do: institute comprehensive tax and social security reforms to put government finances on a sound basis that would permit cutting interest rates.
In its first two years the Workers Party government was surprisingly successful in getting tax and social security reform legislation through Congress.
In December, 2003, Congress passed a very important pension reform providing for a tax on civil service pensions and a phased increase in the retirement age to 60 for men and 55 for women.
(Brazilian civil servants feel entitled to retire early at full pay to pursue second jobs. Brazilian women feel entitled to equal benefits for less than equal years of work.)
The reform legislation was bitterly opposed by the left of the Workers Party, but the leadership held firm. Senator Heloísa Helena and three Workers Party congressman voted against it, so the Party expelled them. Opposition to pension reform was led by public employee unions that made up a very important part of the Workers Party's base.
The Workers Party had consistently opposed pension reform when it was proposed by Cardoso. But once in power, the leadership had the good grace to admit they had been wrong. The Social Democrats could hardly oppose measures they had been advocating for the past eight years.
But combining the Social Democratic and Workers Party votes seems not to have been enough. Passing the pension reform, and an equally important tax reform, apparently also required the support of legislators whose votes were purchased with bribe money, money that was obtained from graft and kickbacks from government suppliers.
The simplest explanation of the bribery scandal is that power corrupts, and the Workers Party wanted, and believed it deserved, to stay in power. After decades in opposition, supporting the Party with tithes on their modest incomes, over 16,000 Workers Party activists now have reasonably well paying patronage jobs.
Building a successful political machine that can get things done is a way to protect these jobs. Brazilian culture has often tolerated corruption from politicians who get things done.
The corruption engaged in by the Workers Party can also be seen as an attempt to overcome a weakness built into democratic politics. In every democratic country, it is very difficult to get public or Congressional support for belt-tightening reforms even when they are desperately needed.
Politicians are judged by how many jobs they can get for their supporters or how much funding they can get for projects in their district, not by their commitment to unpleasant but necessary reforms. It is easy to be popular when, like Hugo Chávez of Venezuela, you have a huge surplus of oil money to distribute. Brazil has no such surplus.
In the past, Brazilian politicians have sometimes been able to make difficult reforms when a crisis has reached the point that no alternative seems possible. Fernando Henrique Cardoso was able to end inflation in the early 1990s because the Congressional leadership feared that a total economic meltdown was imminent.
Lula da Silva and the Workers Party wanted to make difficult changes without waiting for this kind of crisis. They seem to have believed, in good Leninist fashion, that their worthy ends justified their shady means.
For the first two years, Lula's economic policies seemed to be working. Economic growth was strong and employment was up. An essential factor in this economic success was keeping expenditures and inflation down, paying debts and maintaining a stable investment climate.
In their report to the public on the government's first two years in office, the main policy change the Workers Party took credit for was cutting taxes on business, a measure they would have righteously denounced as "neoliberal" had it been done by anyone else.
The Lula da Silva government did experiment with some refinements on Cardoso's model, including creating public-private partnerships to allow strategic businesses to borrow money for long-term investment at more favorable terms.
But this kind of change could have only long-term effects, and even then it is doubtful that government selection of investment priorities is better than leaving them to the market. Government control of credit creates opportunities for corruption when business leaders give kickbacks to politicians to obtain favored treatment.
Ironically, the Workers Party government was turning out to be pretty good for business, while its premier social program - the Zero Hunger project - quickly became an embarrassment.
No one doubted Lula da Silva's sincerity about not wanting any Brazilian to go to bed hungry, but the program his staff devised was old-fashioned and needlessly bureaucratic.
It was modeled on the food stamp program devised in the United States in the 1930s, instead of on more innovative programs pioneered by previous Brazilian governments that gave parents stipends for keeping their children in school.
The Zero Hunger bureaucracy also created opportunities for petty corruption in remote, impoverished communities. The mayor of one such community, Acauã, in the northeastern state of Piauí, observed that: "it was supposed to be for poor families, but it ended up being for political families, for the sons and daughters of the members of the town council and other privileged types." In the state capital, Teresina, more than a thousand state employees were fraudulently enrolled.
Fortunately, the Lula da Silva government had the good sense to listen to criticism of its program. The Cabinet Minister who had designed it, José Graziano, had to be dismissed and the agency was folded into other programs that were already in place and working well.
Until the corruption crisis broke out, the Workers Party was more or less holding its own politically, although the Party's popularity never rivaled Lula da Silva's personal popularity.
Lula's coalition lost control of Congress to a politician from a minor opposition party, perhaps because there was not enough bribe money to go around or not enough Congressmen who could be bribed.
But the Party did reasonably well in the mid-term elections, the biggest disappointment being the loss of the mayor's race in the city of São Paulo to Social Democrat José Serra. Lula da Silva's re-election in 2006 seemed assured.
Now everything is in doubt. Lula da Silva had to turn to the centrist Brazilian Democratic Movement Party (PMDB) for allies, and the PMDB leaders have demanded $2.6 billion in pork barrel projects in exchange for joining the Cabinet. Buying support in this way, although perfectly legal, is more expensive than buying votes with bribes.
The Lula da Silva government may find it necessary to increase government spending to buy support from all kinds of groups - farmers, universities, landless workers, public employees, industrial groups - which will make it difficult to meet its spending targets for keeping inflation down, repaying the country's debts, and lowering interest rates.
Meanwhile, much of the Congress's time is being consumed by Commissions of Inquiry into various corruption accusations. These inquiries, and various police investigations, are certain to catch many little fish, but there is skepticism that they will catch the really big ones.
Lula da Silva is making every effort to portray himself as relentlessly cracking down on corruption while distancing himself from the Party. But his failure to prevent corruption in his own administration raises doubts about either his honesty or his competence.
In this climate, just keeping the system working is a challenge and requires some cooperation from opposition parties. Fortunately, many Brazilian leaders are concerned about governability and are trying to keep things under control until the 2006 elections.
In a speech on June 16, Fernando Henrique Cardoso urged Brazilians not to: "create a climate of instability that could prejudice the continuity of democratic governance...we must not break anything, we must rebuild."
He stated that corruption cannot be tolerated, but neither is it "the end of the world." In a democracy, he said, there are regular mechanisms for investigating and prosecuting corruption, and the work of government must go on while these are followed.
The left of the Workers Party blames the crisis on the government's adoption of economic orthodoxy. Emir Sader argues that Lula da Silva: "could have renegotiated Brazil's debts, subordinating financial targets to the need to tackle the social deficit - citing, as justification, his own manifesto's commitment to ensure that all Brazilians can eat three times a day." But Cardoso had already negotiated an exceptionally good deal on Brazil's debts, and Lula had very explicitly promised to stick with it.
Attempting to "renegotiate" the debt once he took office would have plunged the country into an Argentine-style economic meltdown that would have greatly increased poverty and hunger.
Emir Sader and the hard left understand this, but they are of the "you can't make an omelet without breaking eggs" philosophy. Following their advice would have broken an awful lot of eggs for a very messy omelet indeed.
Back in the 1970s, many of the Workers Party's top leaders were members of Leninist and Trotskyist organizations conducting a courageous but unsuccessful armed struggle against the military dictatorship.
Democracy came to Brazil through nonviolent social movements and political compromises, not through armed struggle. And the world as a whole has changed.
Some Workers Party activists were on a study tour to East Berlin when the masses stormed Communist Party headquarters. With the collapse of the Soviet Union and the adoption of market economics in China, India and even Cuba, they concluded that the future organization of society would be "capitalism in its globalized form, or neoliberalism."
The most important Workers Party leader acting on this assumption today is Finance Minister Antônio Palocci, a Trotskyist turncoat who played a central role in the transformation of the Workers Party to reformist politics.
His role within the administration has been strengthened by José Dirceu's fall from power. The success of his economic policies is the only real accomplishment the Workers Party can point to as it prepares for the 2006 elections.
At this point, the Workers Party government has three alternatives. First, it could change course and move in a more "socialist" direction. This would mean increasing spending on social programs and incentives to favored industrial groups, even at the risk of inflating the currency or even defaulting on the debt.
Mainstream economists believe that this would be ill advised, but they might be wrong. The respected Workers Party economist Paul Singer believes that government social spending could be increased significantly without untoward damage to financial stability.
This option would bring the governments actions in line with its rhetoric and some movement in this direction is the political path of least resistance. But Brazil's finances really do not provide much leeway for increased spending.
The second alternative would be to bring the government's rhetoric into line with its policies during the last two and a half years. Lula da Silva could admit that he sees no viable alternative to the financial policies instituted by the Cardoso government.
A working alliance could be crafted with the Social Democratic Party in Congress to keep things stable until the next elections. This might work best if Lula da Silva announced his decision not to run for re-election, a statesmanlike action that would cool the fervor to discover "what he knew and when he knew it."
This could be accompanied by a constitutional amendment to ban re-election altogether, going back to the system Brazil had before Cardoso. The Workers Party was dead set against re-election when Cardoso proposed it.
Third, the Workers Party could repeat the duplicitous electoral strategy it used in 2002, offering vague promises of radical change with no intention of implementing them. This seems likely.
The new President of the Workers Party is Tarso Genro, formerly mayor of Porto Alegre. In a recent speech, he insisted that "the question of transition to a model of development that generates income redistribution and social inclusion and combats inequality remains open." He conceded that the new model could not be implemented in this Presidential term, but insisted that it would be in the next.
It will be hard for the Workers Party to pull this off again, since they now have to run on their record. The corruption scandals make it hard to argue for giving more control to leftist bureaucrats. But Lula da Silva's personal popularity remains high, and he is moving to distance himself from the Party, seeking support from a broader coalition.
But Brazilians may not yet be ready for a candidate who honestly tells them what he knows needs to be done. Not even the candidate of Cardoso's own party, José Serra, was willing to do that in 2002.
The Social Democrats, for their part, are eager to replace Lula with their own candidate in the 2006 elections. One possibility is to ask Fernando Henrique Cardoso to run again, but he is weak in the polls against Lula da Silva, mostly because of his professorial manner and tendency to tell people what he really thinks. São Paulo state governor Geraldo Alckmin, a younger man without so much historical baggage, might be a stronger candidate. José Serra might also run again.
The best option for Brazil would be for Lula to use his wonderful communication skills to explain honestly that Brazil does not need a radical new economic model.
He could thank his good friend Fernando Henrique Cardoso for starting the country on the right path a decade ago, and explain the difficult reforms still needed to complete the transition to a globally competitive economy.
A friendly competition between the Workers Party and the Social Democratic Party could then give the country the leadership it needs to make necessary reforms honestly.
Ted Goertzel, Ph.D. is Professor of Sociology at Rutgers University in Camden, NJ. He is the author of a biography of Fernando Henrique Cardoso, available in English and in Portuguese. He can be contacted at goertzel@camden.rutgers.edu and his WEB page can be found at http://goertzel.org/ted.
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