BALANCING ACT - Raising living standards in emerging economies

Instead of lowering the rights of workers in Europe, we need to raise the living standards in emerging economies, writes former Brazilian president Luiz Inácio Lula da Silva

I BELIEVE the construction of the European Union is not just a European legacy, but rather part of the world’s heritage.

It is a political institution that inspires countries to work together and increase co-operation and integration in their regions. It was the inspiration for South America, with Mercosur and the Union of South American Nations, and for Africa, with the African Union and the regional economic communities that are now engaged in developing the continent. It is an amazing achievement that countries that have been at war for centuries, begun to work together peacefully to resolve their differences through dialogue and politics and not by force of arms.

It is perhaps difficult to perceive at this moment, especially from inside a Europe suffering from unemployment and the loss of workers’ rights after years of economic crisis, which dates from the collapse of Lehman Brothers in 2008. Mainly for a generation that had the good fortune to grow up in a developed society and did not have to suffer the pain of war. But, just as it is advisable to step back some distance in order to discern the magnitude of a giant monument, certain achievements are only clearly visible when seen from a distance and with a broader perspective of time.

The social rights and the standard of living that Europeans enjoy are still a distant goal for the populations in the majority of countries in the world. The social welfare state is a great achievement, the result of the struggle of generations and generations of workers. We in Latin America are still struggling to achieve part of that which you, in Europe, must fight to protect against opportunistic initiatives to reduce rights.

Working people, the middle class, and immigrants cannot be held responsible for the crisis caused by the irresponsibility of the financial system. Banks were too heavily leveraged with huge speculative investments rather than responsible and productive ones. It cannot be left to the most vulnerable segments of our society — immigrants, retirees, workers, and the countries of southern Europe — to pay the bills for the greed of few.

The brutal adjustments imposed on the majority of European countries — which has been justly referred to ‘austericide’ — has delayed the resolution of the crisis without reason. The continent will need to have vigorous growth to recover the dramatic losses of the last six years. Some countries in the region appear to be emerging from the recession, but the recovery will be much slower and much more painful if the current contractionist policies are continued. More than imposing sacrifices on the European population, these policies are prejudicial even for those economies that managed to resist the crash of 2008, such as the US, the Bric (Brazil, Russia, India, China) countries, and a large share of developing countries.

In order to overcome this crisis, we needed in 2008, and still need today, more political than purely economic decisions. It is essential to understand and explain to the people the origins of the current crisis. Politics, still analog in a digital world, must be renewed to engage in a dialogue with society to identify the problems and to create new solutions. Political decisions cannot simply be outsourced, shifted to technical commissions, multilateral organisations or third or fourth-level bureaucrats. The roles of leaders and political parties cannot be replaced in a democracy. If progressive forces are not capable of presenting new ideas and representing workers and young people, offering advances and hope, we will see, sadly, an increase in the voices that promote fear, intolerance, and xenophobia.

In March, I had the opportunity to talk in Rome with the Italian prime minister Matteo Renzi. His courage and skill trying to solve ancient impasses in Italian society was rewarded by the population with heavy voting in favour of his Democratic Party. It is a clear sign that it is possible to overcome the scepticism with politics.

We need to create a new historical horizon. Not a new theory, but a new utopia capable of motivating the population and serving as a horizon for progressive forces in Europe.

The world has changed in the last 30 years. But instead of lowering the standards of European workers’ rights against the competition of workers from emerging countries, what is needed is to raise their standards of living to levels similar to those of the Europeans. We need a broader and more generous vision of Europe, facing the fact that it’s possible to achieve the goal of a world without poverty.

Thirty years ago, when most of South America lived in sombre times with dictatorships spread throughout the continent, the solidarity and support of the EU and progressive parties were of great help in strengthening the forces of the left and achieving a return to democracy in our region.

Today, after great popular and political efforts, our continent is a peaceful and democratic region, with significant advances in economic development and the struggle against poverty made in the last decade.

In South America, it was the inclusion of the poorest levels of society that helped propel the economy forward, increasing income and consumption, creating strong internal markets, that allowed a progressive agenda with the advancement of social and worker rights.

In Brazil, the numbers that best translate the success of that strategy of investing in the poor are the more than 20m jobs created in the formal sector in the last 11 years, the 36m people that emerged from extreme poverty, and the 42m people that moved into the middle class.

I am convinced that the solution for the economic crisis worldwide lies in the fight against poverty on a global scale. Social funding should not be seen as simply spending, but rather as an investment in people. We must stop viewing the poor of the world as a problem and start viewing them as a solution, both within countries, and on a broader scale around the world.

Investments in social programmes, agricultural production and in financing infrastructure in developing countries, especially in Africa, can create new jobs and a new consumer market. Despite the worldwide crisis, African GDP grew consistently at rates of 5% and 6%, making space for the demand for more sophisticated goods and services produced in the wealthy countries and contributing to a sustainable recovery of the economies of Europe and the rest of the world.

The Europe that managed to be reborn after the devastation of the wars of the first half of the 20th century is proof that it is possible, by politics and democracy, to improve the standard of living of the population.

In South America, a generation of leaders such as Dilma Rousseff, Cristina Kirchner, Michelle Bachelet, Pepe Mujica, Rafael Correa, and Evo Morales, among others, succeeded, against all kind of conservative, and even reactionary opposition, to reach power by democratic means and promote great social and political advances in their countries.

The contribution of the progressive political forces is crucial to our continents. Therefore, a more direct political dialogue and closer ties are needed between South American and European lefts. It is important not only for our regions, but for the whole world.

lThis article is co-edited with Queries (HERE), the European Progressive Magazine published by FEPS, the think-tank of the Social Democrats at European level.

Lula’s lesson for EU on investment

Growth, inflation, stagnation, hyperinflation, stagflation, record IMF rescue, stabilisation, balanced budgets, and early repayment to the IMF. Brazil has been through it all in the past few decades.

But now it is the world’s seventh largest economy, and former president Luiz Inácio Lula da Silva — universally known as Lula — was one of those in the driving seat when the economy was turned around.

Among the measures he introduced, such as a huge growth investment programme, are now being pushed in the EU in a bid to stimulate the kind of 7% growth seen in Brazil in 2012.

But, having weathered the global economic recession of the past few years, growth in Brazil has now slipped. Nearly balanced government budgets of the past few years grew to a 3.28% deficit last year and debt to around 60%, both excellent by EU standards. Inflation is more than 6%, interest rates over 10%. So Lula is well placed to advise the EU on the benefits of social investment, believing recovery is as important for the global economy as it is for the EU.

Ann Cahill, Europe Correspondent


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