Taking shelter

The cities of Brazil have long been segregated by gross inequality. Now slum-dwellers are saying the

I visited São Paulo for the first time two years ago, and I still remember that first drive from the airport to the city centre. Even now, the average visitor could be forgiven for thinking about asking the taxi driver to turn back. In the car window, a bleak landscape flashes by of boarded-up factories, dirty industrial zones and, most shockingly, huge expanses of shanty towns or favelas.

Running right up to the roadside, these slums are not confined to the urban periphery; they are present in the very heart of a city that is segregated by sickening inequality. While some buy apartments at London prices and enjoy a swimming pool on each floor, thousands sleep under bridges, outside shops and in makeshift shelters of wood, card and corrugated metal.

This brutal social division motivates the activists of the Movimento dos Trabalhadores Sem Teto (MTST), or Homeless Workers' Movement. Thousands from different backgrounds join together to campaign for the right to dignified housing for all. Through occupations, roadblocks and camp-outs in front of the mayor's office, the group is forcing the housing issue on to the agenda from São Paulo to Recife.

For many, the decision to join this burgeoning movement flows naturally from the experience of growing up in the favelas. Helena Silvestre, a national co-ordinator for the movement at just 23 years old, grew up in poverty in Greater São Paulo and, aged 11, became involved in local political groups as a "response to the daily problems I was living and witnessing".

The key moment for Silvestre came in 2003 when, unemployed and living alone, she decided to join an MTST occupation in São Bernardo, an industrial area of Greater São Paulo.

"My motivations?" she asks rhetorically. "My parents are very poor, and I have five younger siblings - one sister works at a supermarket for R$450 [about £130] a month. I've always seen my parents work hard but get nowhere - and it seems so irrational to live in a world that produces so much, but where so many people lack so much."

The MTST grew out of the widely popular Landless Workers' Movement in the 1990s and quickly gained autonomy from its rural-based counterpart. Since then, it has grown in numbers and prominence, drawing in many middle-class activists. One such is Lizandra Guedes, a specialist in child education who has put her skills to use for the movement's occupations.

Guedes explains that she was initially attracted to the movement by its principles and methods of organisation, which, she believes, relate to important inner-city problems such as unemployment and drug trafficking. But the homeless workers quickly assumed a deeply personal sig nificance for her.

Describing an initially intense and difficult process as she "broke with the values of her class", Guedes tells me how she realised that the privileges of her middle-class background - such as the education to which she had access - could contribute to class conflict. "The movement has made it possible for me to remake my identity, redefine my life objectives - and, of course, has produced a hope for an end to social domination and oppression," she says.

The MTST focuses primarily on carrying out urban occupations. Since 2005 it has held two major camps in Greater São Paulo. The locations chosen for these protest camps are plots of vacant land, often owned by speculators simply waiting for the right time to make a profit on their investment. The names of the camps reflect Brazil's historic social struggle: for example, there has been "João Cândido", after an African-Brazilian slave descendant who led a sailors' revolt in 1910, and "Chico Mendes", after the rubber tapper and trade unionist murdered in 1988.

Each camp generates further actions, typically demonstrations targeting seats of executive or legislative power. Last year, 5,000 people marched 18km to the state governor's house. Sometimes there is a crescendo of direct action, such as last year again when, in so-called "Red April", a traditional season for leftist action, homeless acti vists blocked three main roads in São Paulo. In October, a similar protest created gridlock in the north-eastern city of Recife.

The camps that spring up during the occupations are not only a visible expression of outrage at unjust land ownership. In their very structure and activities, they embody a much broader political and social vision. The camps are built around communal kitchens where those who have no money to buy food are able to get a meal. There is a unity of both resources and vision.

"Everyone thinks of a better life! No one wants their children to pass through the same difficulties they have had - and I don't have different dreams from others," says Silves tre, whose association with the group started when she worked in one of the camp kitchens. "For me, the movement is important because it is where I am able to realise this dream, alongside and sharing with others doing the same thing."

The results of the occupations vary. The first such action in Campinas eventually prepared the way for a housing project for more than 5,000 families. Yet there is always the risk that the authorities will refuse to negotiate, and that the military police will use violence to break up a camp before there have been any concrete gains. In some cases, the police have cut off supplies to camps, including food and water.

Living in hope

Brazil's government is often described as being part of the general move leftwards of governments in South America, but police brutality against such movements has, on occasion, been authorised by local officials of President Lula da Silva's own Partido dos Trabalhadores (Workers' Party). MTST activists can barely conceal their disdain at the way in which, in the words of the São Paulo State co-ordinator Marco Fernandes, Lula's party forsook its once-impressive grass-roots support and turned into an "election-winning machine".

Silvestre echoes her comrade's disappointment, lamenting that the homeless activists have few supporters in government and must rely instead on smaller, radical leftist groupings. But perhaps the absence of friends in high places is not such a bad thing. Across South America, grass-roots movements have taken the lead in challenging neoliberal orthodoxies, sometimes as part of an electoral strategy (for example, propelling Evo Morales to victory in Bolivia) and other times by creating "pockets of resistance" (similarly to the Zapatistas in Mexico).

Guedes affirms her belief that forming groups such as the Homeless Workers' Movement is the most effective way of organising people to work for "radical social transformation". There is a long way to go, even in Brazil. However, the campaign for proper housing for all is, in its bold vision, kindling hope across the nation and keeping the spotlight on one of the country's most pressing problems. The plan is to continue the occupations and direct pro tests throughout 2008, with the simple message of affordable and dignified housing for the rapidly increasing numbers of urban poor.

"You live in what capitalism has constructed, but you don't stay still, looking on," says Silvestre. "You live it, because you are obliged to. But from the inside, you plant the seeds of another place."

Ben White is an activist and writer. His latest book is "Palestinians in Israel: Segregation, Discrimination and Democracy"

This article first appeared in the 24 March 2008 issue of the New Statesman, The truth about Tibet

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt