This week marks the sixty-first anniversary of the military coup in Brazil, coinciding with a time of great instability in the country’s liberal democracy. A few days ago, the Federal Supreme Court ordered Jair Bolsonaro to stand trial for attempting a coup during the 2022 elections, an event that for Brazilian progressive forces evoked memories of the terror under the dictatorship and renewed debates about the threat of authoritarianism today. To explore the meaning of these experiences in light of current events, Phenomenal World editor Hugo Fanton spoke to Frei Betto, an organizer whose social and political work helped facilitate the resistance to the Brazilian military dictatorship, and caused him to be twice imprisoned by that regime.
A Dominican friar and writer, Frei Betto took part in the creation of the ecclesial base communities (Communidades Ecclesial do Base, or base communities), a form of organization encouraged by the parts of the Catholic Church practicing liberation theology in Brazil during the Cold War. These groups met regularly in a specific area—slums, schools, factories, etc.—to combine biblical reading with a debate on the political and social reality they were experiencing. They became one of the main mechanisms of resistance to the dictatorship and the fight for democracy in Brazil.
Frei Betto is the author of a number of books based on the experience of community organizing during the dictatorship, including Letters from Prison and Baptism of Blood, a work exposing the military regime for its crimes against humanity.
At a time when authoritarian forces are advancing in Brazil and around the world, and with the number of arrests and deportations rapidly increasing in the US under Donald Trump, the processes of regime transition toward increasingly authoritarian methods are more relevant than they’ve been in decades—as are the struggles to ensure that the horrors experienced in Brazil are never repeated.
An interview with Frei Betto
Hugo fanton: April 1 marks the sixty-first anniversary of the military coup in Brazil. Could you put it into context?
FREI BETTO: After the Second World War, as the Allies succeeded in defeating Nazi-fascism, a wave of democratization led popular movements worldwide to organize and demand rights. In Brazil, Getúlio Vargas returned to power in 1950. He had ruled the country under a dictatorial regime for 15 years, but had granted great benefits to the working class and was therefore considered the “father of the poor.” Vargas was also the mother of the rich, but in this new government, at the beginning of the 1950s, the conservative sectors of Brazilian society plotted to overthrow him because they did not accept policies that promoted better living conditions for the working classes. This right-wing conspiracy led to Vargas’ suicide in 1954, and Brazil entered a period of great political instability.
At the beginning of the 1960s, Jânio Quadros was elected, which only deepened this instability, as he resigned seven months after being elected, thinking that there would be a large national mobilization to bring him back to the presidency with authoritarian powers. That didn’t happen. The vice-president, João Goulart, better known as Jango, took over.
In this period, the word that most defined Brazil was the adjective “new.” Bossa was nova, cinema was new, literature was new. Celso Furtado’s economy was new, everything was new. Brazil was experiencing its emancipation and a progressive turn, which granted more freedom to social movements such as the peasant leagues and the student movement. In short, it was an effervescent country with a lot of creativity, many achievements, and economic policies that were quite unexpected. All of this was dismantled by the military coup of April 1, 1964.
The Brazilian elite didn’t anticipate that the popular sectors would threaten the privileges and interests of the ruling classes by, for example, demanding land reform. Brazil is a country of continental dimensions and has never known land reform, unlike its neighbors Bolivia and Peru, to name just two examples. This threat to privileges led to several coups with support from the White House, which established civil-military dictatorships throughout Latin America. This happened in many countries on our continent, as part of the US campaign to contain communism. In Brazil, while João Goulart’s government had many progressive aspects, there was nothing communist about him. He was a democrat and even a landowner, but he was sensitive to popular demands. As a reaction to this agenda, the military, subsidized by and in coordination with the United States government, carried out a coup on April 1, 1964. They tore up the Brazilian Constitution and implemented a regime of terror that lasted twenty-one years, of which I was personally a victim.
HF: How did this affect your life at the time?
fb: I was arrested as a student leader for fifteen days in June 1964, a few months after the coup. Then, in 1969, while working as a Dominican friar, I was arrested again for my work in support of the resistance and the struggle to re-democratize the country. I remained in prison for four years, until 1973. That period was marked by a lot of cruelty, torture, and the disappearances of those who were fighting for another social system, in this case socialism, or for the mere re-democratization of their countries. And we saw the spread of military coups to Argentina, Uruguay, and Chile. This tragic period in Latin American history was all financed, bankrolled, and sponsored by the White House.
At the beginning of the dictatorship, some liberal and democratic leaders, such as Rubens Paiva, who is portrayed in the film Ainda Estou Aqui (I’m Still Here), thought that the coup would just be a period of rearrangement for the ruling classes, under the tutelage of the military. They didn’t think there would be torture, disappearances, shootings, or cruelty at such a scale, as is condensed in the work Brazil: Never Again.
But the dictatorship did take hold, and although different generals took turns as president, its character became increasingly violent, murderous, and genocidal. The situation became more dire after December 1968, when the regime passed Institutional Act No. 5, which many analysts call the coup within the coup, as it institutionalized extrajudicial killings and the suspension of civil rights. Things really escalated at that point, and democratic forces began to resist the military dictatorship, both by peaceful means and by armed means. Groups and parties began to arm themselves in order to confront the military power of the dictatorship. This led to a great deal of wear and tear on the military regime.
HF: What was the work of resistance like throughout the 1970s? What would you highlight in terms of this organizing—whether it was comprised of permanent, daily, or less habitual patterns of opposition—in the extremely unfavorable context of political arrests, torture, murders, and disappearances?
fb: There was a period when this resistance was clandestine, either peacefully or through armed struggle. But during the mid-1970s it took on the dimensions of a mass struggle through union strikes. The union movement, led by Lula, denounced the dictatorship’s economic policy—the so-called “miracle”—as false, a big lie to cover up the real dynamics of the economy. Large unions began to mobilize, bringing thousands of people onto the streets to demand labor rights. This progressively undermined the foundations of the dictatorship.
The positive consensus in Brazilian society that the military had saved the country from communism started to fade as people became increasingly aware of the regime’s atrocities. It was also very important that official trade unionism was opposed and replaced by grassroots mobilization.
Brazil has always had grassroots organizations. From the sixties onward, through the progressive sectors of the Catholic Church, we formed the base communities that gave birth to what is known today as liberation theology. These communities did not attract the attention of the dictatorship, which considered them just a religious phenomenon. Meetings would begin with a reading of the Bible from the perspective of the oppressed, through an embrace of Paulo Freire’s pedagogical method. Ignoring the base communities was a big mistake on the part of the military, as these meetings turned toward training militants for popular activist movements, for trade union mobilizations, and, later, for organizing new political parties.
Between the 1960s and 1970s, there was a great spread of progressive Catholicism in Brazil. Grassroots organizing extended through favelas and factories, generating a more combative opposition within trade unions then tied to the dictatorship. This organizing struggle opened the way for new political parties. Among them was the Workers’ Party led by Lula.
So this is the process that brought together popular forces and undermined the dictatorial regime. Its victories included the return of exiles and the establishment of new national associations for organizing the working classes, such as the Central Única dos Trabalhadores and the Movimento dos Trabalhadores Rurais Sem Terra.
Unfortunately this process, this progressive organizational accumulation, has been lost in recent years. The election of Bolsonaro points to a global phenomena of weakened progressive forces and a strengthening of rightward mobilizations.
Hf: To what do you attribute the new rise of authoritarianism?
fB: After democracy was won due to the social, economic, and political failure of the dictatorial regime, we thought Brazil would never have an autocratic government again. But the world situation is not always linear, and is rather cyclical. Today, in my opinion, we are experiencing a wave of authoritarianism with a strong Nazi accent. This is happening on every continent, and is further exacerbated by the election of Donald Trump in the United States, as he is openly and avowedly an autocrat. An old joke in Latin America is that there has never been a coup in the United States because there is no American embassy in Washington. This is no longer true. The threat is now real there too. Trump tried to stage a coup d’état, and fortunately he was defeated, but now he’s back in office with massive support from the US population.
This authoritarian bias is in vogue around the world, and is due to several factors. During the Cold War, there was bipolarity, with the capitalist countries hegemonized by the United States and the East by socialism in the Soviet Union and China. This created a certain balance of forces. I believe that the greatest achievement of socialism did not take place in any socialist country, but in Western Europe: the working classes won many of their rights, guaranteed by law, because the European bourgeoisie feared that the workers would embrace the path of socialism and communism. The welfare of the working class in Europe was never as solid as it was in this post-war period lasting until 1989.
With the fall of the Berlin Wall, the world elite tore off its mask. And with the change in the pattern of capitalist accumulation from production to speculation, these elites now have much more income and power. Today, we have a world dominated, on the one hand, by speculators and, on the other, by these Big Tech companies that produce nothing, but just process our knowledge and information, turning it into merchandise and also into a force for dominating consciousness.
So I think we are in a world in which consciences are experiencing a spiritual domestication. We’ve always talked about globalization and I’ve always criticized this expression: what really exists is globo-colonization, the colonization of the planet by a system of society that is capitalist; a hedonistic, consumerist system that turns human beings into merchandise because we’re not worth our intrinsic dignity, but rather the goods we own or don’t own. The more we possess material goods, the more we are welcomed into society. There is an accelerated process of domination, causing social ties to become increasingly frayed. Union, or party relations are increasingly atrophied. There’s a strong tendency for networks to lead to individualism, because associative ties are being eroded and, at the same time, narcissism is being accentuated. The logic of social media produces both narcissistic feedback and a great dependence on these Big Tech companies that don’t exist to facilitate our communication but to sell products.
Hf: Is there a parallel between Bolsonaro and the military coup in 1964, between today and what we experienced under the dictatorship?
fB: Yes, because Brazil, unlike Argentina, Chile, and Uruguay, has never punished its torturers and murderers. On the contrary, it has created an odd mechanism from a legal point of view, which is the reciprocal amnesty. Instead of being denounced, tried, and sentenced, the torturers and murderers were granted amnesty at the same time as those who fought against the dictatorship. This meant that the culture of the dictatorship remained warm in the barracks of the Army, Air Force, and Navy. And they consider the 1964 coup to be a breakthrough, a revolution, and not the establishment of a dictatorship. Bolsonaro is the son of this strongly Nazi-like military background, just like all those who, with him, attempted the failed coup of January 8, 2023.
But today, they can’t find support in the military institutions. I don’t see any possibility of a new coup as we had before. But while Bolsonaro is ineligible to run for office, I do see the possibility of his people winning the next election in 2026, including the office of the President of the Republic. The authoritarian threat is in place. I think we progressives have to step up our work, because the risk is there. There is a tendency in Brazilian society to support this Nazi-fascism that characterizes Bolsonarism. I think this is a very big risk. So we need to get back to grassroots work and master the digital networks. We’re very reactive, we’re not proactive on digital networks.
Hf: What impact does the Trump administration have on this situation?
Fb: Trump is going to rule autocratically, ignoring the laws, the judges, as seen in the deportation of Venezuelans to El Salvador. The question is how the US judicial system reacts, to what extent it has the strength to stop him. If the mechanisms of checks and balances aren’t activated, I think that, looking at today’s scenario, he won’t be in office in four years’ time. He can’t be a candidate, but he can invent a casuistry, a new amendment to the US Constitution that allows him to be a candidate again. It’s too early to make an assessment, but I predict an extremely autocratic government, on the edge of what would be a declared dictatorship.
But all this will depend a lot on the performance of his government. Already, in his two months in office, he is creating a great deal of disappointment. Sixty days in office, and his prestige is already going down the drain. The wear and tear is already too great. The most sensitive part of the human body—the pocket—is a source of tension in Brazil, the US, or anywhere else. What will be the government’s role in people’s well-being? Food, health, education, etc., or war, arrests, and deportations?
Across the world, parties governing amid the post-pandemic rise in prices have found themselves punished at the ballot box. The seeming ubiquity of this voter reflex, which has transcended the left-right divide, translates to a political cry for help: just do something. The question, though, is what to do. The answer to this question today is unusually constrained in historical terms: interest rate increases and public-sector austerity. The example of Javier Milei is a case in point: the Argentine president took office in December of 2023 amid triple digit inflation and slashed public spending. While inflation in the country has dropped in response, the country’s poverty rate has climbed to 50 percent.
But persistent and accelerating rising prices were not unusual during the decades after World War II, and how governments should understand their cause was a central problem of politics and economic theory. The newly created United Nations understood the stakes of inflation, and in 1948 established a commission to study the roots of rising prices in Latin America and the Caribbean. Amid the birth of a Latin American school of critical economics in the years after World War II, “structuralist” economists associated with the UN’s Economic Commission for Latin America and the Caribbean (Comisión Económica para América Latina or CEPAL), argued that inflation accompanied development occurring within an imbalanced system of global trade. “Monetarist” economists, associated with the International Monetary Fund (IMF), instead blamed inflation in developing South American countries on excessive monetary expansion and fiscal mismanagement. The diverging political implications of these two interpretations were stark, lending themselves to distinct policy programs which would shape the trajectory of the region.
Margarita Fajardo, professor of history at Sarah Lawrence College, examines CEPAL and its contributions to the knowledge and theory of inflation in her 2022 book The World That Latin America Created. Her current follow-up book project considers the history of inflation (alongside commodity regulations) and its importance to the transition to a neoliberal order in Latin America. For Phenomenal World, geographer Sammy Feldblum spoke with Fajardo to understand the hemispheric history of how inflation might be mobilized for a different sort of political-economic project. The following conversation has been edited for length and clarity.
An interview with Margarita Fajardo
sammy feldblum: One of the major themes of your book is institutional personalities: how institutions of knowledge production like CEPAL came to shape Latin American economics, including the interpretation of inflation.
What is CEPAL? How did the economists employed by CEPAL come to collect and analyze data in a different way from those working on macroeconomic theory in the US in the 1950s? And what historical circumstances gave rise to CEPAL’s critiques of the global economy and the economic science developed to explain it?
margarita fajardo: Although CEPAL became eventually known as a Latin Americanized institution, we must remember that it is a UN-affiliated body. That global aspect is often forgotten, but it’s important because it gives a sense of CEPAL’s potential resources, leverage, and ideological diffusion.
Intellectually, CEPAL is best known for a few key notions that are often packed together under the umbrella term of “dependency theory.” The main contribution of the cepalino understanding of development was to place development in the context of a global political economy of countries divided between center and periphery: the industrialized centers producing manufactured goods and the periphery producing raw materials for the world markets. That international division of labor gives rise to specific political economies, specific labor struggles, and specific monetary policies. These specificities are what cepalinos identify as the source of a long-term decline in the terms of trade, impeding Latin America’s development in the long run. Given that diagnosis, cepalinosproposed two different strategies: first, industrialization that substitutes those goods previously imported from the world’s economic centers, and second, international cooperation between those centers and peripheries to make trade fairer and more conducive to the economic development of the periphery.
The book tries to unpack the notion of “dependency” and give each of the ideas within that framework its time, place, and trajectory. It’s important to really understand the differences between these concepts—and the politics behind each of them—because they emerged during distinct periods. CEPAL is known for the center-periphery framework, the structuralist approach to inflation, and then dependency theory. The center-periphery framework was rooted in the post-World War II context. The structuralist approach to inflation, which I will explain in a moment, rose in the 1950s in relation to the politics of inflation in Chile and Brazil. Full-fledged dependency theory emerged in the mid 1960s and 1970s in response to the early theory of the center-periphery structure of world production and trade, and also in response to the changing political economy in Latin America, which was considering the role of international capital and of the political forces of development at the local, national, and global levels.
Institutions, individuals, and ideas—that is the tripod in which I conceptualize CEPAL and its role. In the book, I focus on individuals that shaped the trajectory of the institution, and also how the institution and the individuals clashed and altered each other’s trajectories. Those particular individuals include Argentinian Raúl Prebisch, long-time head of CEPAL and prime mover of the center-periphery framework. Then the “structuralist approach to inflation” connected many different cepalinos, including Mexican Juan Noyola, Brazilian Celso Furtado, and Chileans Anibal Pinto and Oswaldo Sunkel. Dependency theory brought in German-American Andre Gunder Frank and Brazilian Fernando Henrique Cardoso, just to name a few.
There are also those who participate in the dependency framework and are not linked to CEPAL. The confluence of these institutions, ideas, and individuals is what led to the rise and transformation of what I call the cepalino project.
sF: You note that the structuralist approach to inflation arose in the 1950s, but earlier, in the case of Chile for example, there was a policy of tolerance to inflation. Why and when does inflation come to be seen as a threat to economic development and social peace, and how does that figure into the initial period of cepalino thinking?
MF: The structuralist approach to inflation rescued and redeployed that foundational framework of CEPAL. Chile, the headquarters of CEPAL, greatly influenced the institution. The country had experienced long-term double-digit inflation, though not hyperinflation, for decades. In that context, inflation came to be assumed as the cost of development, or the accompaniment to growth. But there was a point in the 1950s when that consensus started to break. Why? Perhaps it has to do in part with the stagnation of development. When development and inflation coexisted, the latter was tolerated. But once development started faltering while inflation persisted, the search for new explanations for inflation began.
Cepalinos, like everyone else, initially thought of inflation as driven by costs: wages that increase above price levels that then are translated into prices. This creates a wage-price spiral that is transmitted to the rest of the economy. As development faltered and labor struggles over real wages intensified, some cepalinos worried that the wage-price spiral was not only unable to explain the rise in prices, but that it also fueled the fire of conservatives, who did not want to concede on those labor struggles by lowering profits or engaging in some form of redistribution. As cepalinos debated the sources of inflation in Chile among themselves, they were also thinking in relation to another big institutional actor in Latin America, the IMF. There, we can see the growing split between the structuralist and monetarist approach to inflation.
Cepalinos considered not only the amount of money in circulation, but also the structural factors affecting inflation, including the international economic structure, land tenure regimes, and balance between the different sectors of the domestic economy, among others. They argued that the international division of labor between raw-material producing peripheries and the industrial center—and the falling terms of trade for the former—made imported goods costlier, both hindering development and promoting rising prices. Similarly, the land tenure system, with its large, idle landholdings, made foodstuffs and agricultural products expensive or unavailable, turning countries towards imports amid a shortage of foreign exchange. As cepalinos debated the causes of inflation, they gave rise to the structuralist approach to inflation in the 1950s, which was eventually recast as the antithesis of the monetarist approach to inflation ascribed to the IMF.
sF: Can you elaborate more on these distinct approaches to inflation? What kind of policy program does each approach put forward?
MF: The structuralist approach tries to understand inflation as a product of development, meaning that the economic development in this postwar context was driven by demand for imported capital goods required for industrialization. This meant that development, the industrialization process, required imported capital goods which—given the shortage of foreign exchange and falling prices of exportable commodities—created inflationary pressures. This approach differentiates between the structural causes of inflation and inflationary pressures like wages.
The response required sustainable and accelerated development to break the bottlenecks that lead to inflation. If there’s not enough food, and food needs to be imported, then prices can rise. If we need to import capital goods, then we can either develop the capacities to manufacture goods ourselves, or we can create stable foreign exchange flows by stabilizing the prices of commodities to lower those inflationary pressures. The toolkit of the cepalinos, or the structuralists, sought to foment development through international cooperation in order to manage inflationary cycles. This would prevent the rapid adjustments in income required to control inflation, instead using international cooperation to soften those effects and have a less detrimental impact on the population.
The monetarist explanation of inflation has to do with the quantity of money available in the market, the source of which is private banks, the central bank, and the government treasury. The solution has to do with controlling that money supply: central bank regulations and cutting fiscal expenditure.
The structuralists think of inflation as a cost of development. The monetarists think inflation impedes development. Monetarists think that if the problem of inflation can be solved, then development will follow.
sF: How important is this split in driving the dependency theorists’ criticism of CEPAL more generally? I’m thinking specifically of the structuralist criticism of Raúl Prebisch’s stabilization plan in Argentina in the 1950s.
MF: Initially, the structuralist and monetarist approaches were not exclusionary paradigms. They could concede points to the other side. But over the course of stabilization plans in both Chile and Brazil, the political debates became heated. The paradigms of CEPAL and the IMF became more polarized. CEPAL was the “International Monetary Fund of the left,” a toolkit and institutional fulcrum to challenge the policies of the IMF. Certain cepalinos like Prebisch would say that such an oppositional approach would actually undermine an understanding of the true social costs of inflation.
The confrontation between structuralists and monetarists positioned cepalinos on the left of the polarized political contests in Latin America, especially as a result of the Cuban revolution. But also, while some cepalinos sided with the Cuban revolution, others trusted the Alliance for Progress, the US counterrevolutionary response to Cuba, as a solution for accelerating development. The alignment of CEPAL vis-a-vis the Cuban Revolution and the Alliance for Progress led to criticism from dependency theorists, who, in response, sought a different model. For some dependentistas, CEPAL’s institutional rupture with Cuba signaled that the organization was complicit with imperialist forces and thus an agent of underdevelopment.
sF: In 1970, Salvador Allende gave dependency theory-adjacent Pedro Vuskovic wide leeway to implement a program of economic planning in Chile. How does Vuskovic approach inflation while in power? How does the resulting high inflation under Allende spark backlash to the regime?
MF: I don’t know if Vuskovic would call himself a dependentista, but I do think he was very much influenced by dependista ideas, and he was a member of the Socialist Party. He implemented a plan to accelerate development through granting subsidies, raising wages, and promoting industrial growth. That push towards development initially worked.
There were many different factors at play, so it’s hard to tell in the Chilean case why exactly that approach failed. Did it have to do with sanctions, or domestic and international sabotage, or the failure of these policies in and of themselves? In any case, production didn’t increase at the pace of demand. That resulted in a shortage of goods which eventually translated into rising prices and the emergence of a black market. It was hyperinflation that marked the failure of the Allende project.
sF: In thinking about the struggle between the contrasting interpretations of inflation, Fernando Henrique Cardoso presents an interesting case. He was straightforwardly a dependency theorist and to the left of CEPAL in the 1970s. By the time he came into power in Brazil the ‘80s and ‘90s, he implemented stabilization plans that were part of a broader neoliberalization of the Brazilian economy. What does this say about the trajectory of dependency theory more broadly?
MF: The case of Fernando Henrique Cardoso, one of the pioneers of dependency theory, allows us to see how we move from state-led development to the neoliberal state and the neoliberal order. I think there’s some consistency in his transition despite the drastic change. His critique of dependency theory emerges from his critique of the developmental state, which he saw as a populist alliance between workers, industrialists, and the state. That critique persists as Brazil turns from a developmental state under authoritarianism to a developmental state under democracy. Throughout his career, Cardoso tries to understand and unravel the state as an economic actor—the role it should and shouldn’t play. These are the main questions of his intellectual and political project.
sF: Because dependency theory has an anti-imperialist ethos, it remains popular among Marxist intellectual historians and much of the left. Yet the world economy it describes has evolved considerably in terms of industrial structure and the international division of labor. What do you think about the accomplishments, limitations, and legacy of Latin American structuralism and dependency theory today?
MF: One of the meanings of dependency theory that has perpetuated over time is its ability to point to the insertion of Latin America in the global economy as the reason for many of the economic, social, and political difficulties that the region faced in the mid-twentieth century. That critique was embedded in cepalino thinking from the start. The contribution of dependency theory is interrogating the relationship between the global economy and the internal structures of power, and the balance between those different social actors. I think that dependency theory could be used again to identify those local forces, the internal political structures of power that work with external global forces to perpetuate or challenge a specific model of development.
While the world’s attention was focused on the United States presidential election that would deliver Donald Trump a decisive victory and a second Presidency, Brazil’s municipal elections in October were signalling the political balance for the coming years within the second largest country in the hemisphere. Elections for city council and mayoralties take place all on the same date, and—much like the Congressional midterms in the US context—are often read as an indication of the health of the ruling government’s support, and weigh heavily on intraparty disputes over strategy for incumbents and opposition alike. In São Paulo, Latin America’s largest city and Brazil’s largest single electorate, some trends asserted themselves: namely, the concerted success of centrist forces to defeat the favored candidate of the left, and the surprising rise of a non-Bolsonarista far-right candidate in Pablo Marçal.
To discuss the election results and Brazil’s current position on the global stage, PW editor Hugo Fanton spoke with political scientist André Singer. The wide-ranging interview addresses Singer’s recent writing on Brazilian party politics, class structure and political behavior, varieties of autocracy, and striking similarities between the United States and Brazil. Singer is Professor of Political Science at the University of São Paulo (USP), former spokesman for President Lula Inacio da Silva (2003–2007), and the author and editor of numerous books, including O segundo círculo: Centro e periferia em tempos de guerra,released in Brazil last September.
An interview with André Singer
Hugo Fanton: Pablo Marçal’s performance in São Paulo’s mayoral election drew nationwide attention. Who is Marçal, and what does his candidacy tell us about the Brazilian political scene, and the prospects for the 2026 presidential election?
André Singer: Pablo Marçal, an internet influencer, was completely unforeseen by the major political players. He came out of nowhere, backed by a political party that has no representative in the National Congress, and yet secured 1,700,000 votes. It was an extraordinary result in the most important electoral contest of the year: the city of São Paulo. By a difference of just 50,000 votes—a very small margin—he didn’t make it to the second round. In addition to the general shock, Marçal’s success exposed unforeseen issues on the right of the political spectrum: a young man, thirty-seven years old, with no support other than his own communication skills, was able to mobilize São Paulo’s far-right electorate away from former President Jair Bolsonaro. Marçal became a far-right figure, independent of Bolsonaro and his chosen candidate, the Brazilian Democratic Movement (MDB) candidate, as well as the city’s incumbent mayor, Ricardo Nunes.
In order to get re-elected, Nunes nominated a Bolsonaro appointee as deputy mayor, confirming that there was a formal alliance not only with Bolsonaro’s Liberal Party (Partido Liberal, or PL), but with Bolsonaro himself. Once Marçal began to climb in the polls, Bolsonaro found himself in a difficult situation. At first, he tried to disqualify Marçal in order to boost Nunes’s campaign. But this backfired, and Bolsonaro’s own supporters forced him to retreat and reconcile with Marçal. This shocking grassroots defection seriously threatened Nunes’s prospects.
In that moment, I believe, it became clear that the main winner of the entire 2024 electoral process was São Paulo state governor Tarcísio de Freitas. Tarcísio supported Nunes’ candidacy and was in debt to Bolsonaro, who made him his gubernatorial candidate in 2022 and delivered him a victory on the back of his strong base in the countryside. Now, two years later, in the middle of this situation, Tarcísio found himself faced with a decision: to stand with Nunes, or with Marçal and Bolsonaro. Tarcísio opted for the former, saving Nunes’s bid for re-election, which eventually caused Bolsonaro himself to retreat from supporting Marçal and take a more or less neutral stance. Tarcísio, despite opposing Bolsonaro and Marçal, asserted throughout that the former president needed to come back to Nunes—understanding that if the right unified, it would be competitive.
Tarcísio represents what I called “Shrek-like Bolsonarism” in a recent article for piaui: a right-wing politician that seems friendly in contrast with extreme figures like Bolsonaro and Marçal. He is a hybrid figure who is originally from the monstrous extreme right but presents himself in a more palatable way for the non-extreme right. Mayor Ricardo Nunes has the same profile. He does not appear as an extreme right-wing figure, but embraces several of their slogans and pursues unity across the right.
São Paulo’s municipal election was widely covered in the national media and can be viewed, relatively speaking, as a preview of elements that may return in the 2026 presidential elections. Of course, Brazil is different from São Paulo and there should be no automatic transposition. But some of what happened here may prove useful in understanding certain elements of 2026. The 2024 election demonstrated the power of the far right after its defeat in 2022. It was the first time that the far right returned to the polls, after Lula’s victory and Bolsonaro’s exile from the electoral system, and it proved to be powerful—not enough to win, but enough to compete. Crucially, it proved that if there is unity, the right can win the election.
HF: The parties that performed best in these municipal elections are called the partido do interior—parties of the interior, or rural areas in Brazil. These are parties like PMDB, PSD, and so on, which perform well in the local governments of the countryside and are closely associated with regional elites. What does their success reveal about the traditional right wing and the Bolsonaro coalition? Is there a realignment taking place?
AS: In 2006, I described an electoral realignment that had taken place through the election and government of the Workers’ Party (PT).1 That realignment was characterized by the decisive shift of the bottom of the social pyramid—households earning zero-to-two times the minimum monthly income—from the array of Brazilian parties and toward a strong alignment with Lula and the PT. This fundamental alignment is still intact. Datafolha’s assessment of Lula’s government at the beginning of October is an indicator of this: 36 percent of the electorate as a whole rate his government as “good and excellent.” But at the bottom of the pyramid, this proportion rises to 46 percent. For everyone else who isn’t at the bottom of the pyramid, it’s around 27 percent. That’s a big difference. It’s as if the country were divided into two blocs, two great social halves, with the bottom half supporting the government and the top half tending not to support it. Numbers like this lead me to believe that Lulism is still standing. Another element that points in this direction: the only major victory for the PT in the municipal elections was in Fortaleza, one of the main Northeastern capitals, which is the center of the subproletariat, that fraction of the class that is technically at the bottom of the pyramid. So, in that sense, the alignment from the early-2000s remains. What is new, however, is that there is a shift within the middle class from the point of view of party identification, which began with the depletion of the Brazilian Social Democratic Party (PSDB) and the migration of these sectors to the extreme right from 2016 onwards.2
One of the ongoing factors—which was also very apparent in the 2024 municipal election—is Bolsonaro’s attempt to build up a party to organize and replace the PSDB, and that is the PL. Bolsonaro first joined the Social Liberal Party (Partido Social Liberal), which he left while in office. Then he launched his own party, which was abandoned along the way and dissolved. Finally, he joined the Liberal Party which had been around for a long time, and whose top leader was willing to become the main organizer of Bolsonarism. Therefore, Bolsonarism now has a party vehicle that did well in the elections. It’s the party with the most state resources for campaigning, because it holds the largest caucus in the Chamber of Deputies, and it did very well in October.
However, this comes at a price: like any force that joins the institutional game for real, there is a normalization effect. Somehow, it is drawn into the implicit or explicit rules of the electoral game. The implicit rule in the Brazilian case is that these parties need to behave like what former President Fernando Henrique Cardoso, when he was just a political scientist forty years ago, called a partido ônibus, or “bus party”—meaning you can join and leave at any time, and the parties don’t necessarily have a homogenizing influence on their members, such that regional and local sections can bear very different characteristics. This “bus party” form leads to some very odd cases, like local alliances between the PL and the PT. It’s rare, but it has happened—just to give foreign readers an idea of the complexities of Brazilian party politics.
The PSDB was partly replaced by the PL, but also partly by the Social Democratic Party (PSD), which is led by a very traditional politician, Gilberto Kassab. In São Paulo state, especially in the countryside, the PSD has absorbed the old PSDB machine, a very strong structure in a very powerful state. As a result, we’re witnessing a reshuffling of the right of center. On the one hand, the extreme right has acquired a party apparatus with some robustness; while, on the other, there is the strengthening of a party from the so-called centrão—the large, ideologically thin, and highly transactional group of parties that make up the center of Brazilian politics. The PSD, a partido do interior, is a more moderate force that has grown in size with the potential to dominate the centrão. The right’s problem is whether it will be able to produce an alliance between the PSD and the PL. In the elections in São Paulo, the right and the far right were separated in the first round but combined in the second. The question is whether they can do this on the national stage in 2026.
So what uncertainties hang over the election next year? Firstly, whether Bolsonaro will insist on being a candidate, even though he is legally barred from running. There are several signs that he will run, and in this he would mirror what President Lula did in 2018 while facing a prison sentence for now-annulled corruption charges: he waited until the very last moment to acknowledge that he could not be an eligible candidate and nominated Fernando Haddad to run in his place. If Bolsonaro does this, it will create problems for alternative candidates. For example, if Tarcísio wants to run, he will need to build his name nationally, which requires mobilizing earlier rather than later. But to do so would mean stepping into the open and confronting Bolsonaro, thereby contradicting one of his premises: the right will lose if it is not unified. Tarcísio’s problem is this equation. The second major uncertainty is whether Marçal or a candidate like him would have a chance of reproducing, on a national level, what happened in the city of São Paulo. It’s a very difficult question, because Brazil is not São Paulo. Brazil is a giant, heterogenous country, with a wide range of different characteristics across region, religion, age, gender, and so on. But it’s not impossible, as demonstrated by the previous phenomena of Jânio Quadros, Fernando Collor, and Bolsonaro himself.
HF: Can you say more about the relationship between these shifting political forces and the country’s class structure?
AS: I’m going to start from the bottom up and talk about four population segments. First, there’s the base of the pyramid. As I said before, looking at this section shows that Lulism still stands. For example, one of the most significant victories in Brazil was that of João Campos (Brazilian Socialist Party, or PSB) in Recife, who was leading the coalition that supported Lula in 2022 and who was supported by Lula now in 2024. Recife is one of the largest cities in the poor region of the Northeast, and historically the home of many national political leaders. We’ve already talked about the PT’s victory in Fortaleza, also in the Northeast, and then there’s Eduardo Paes’s (PSD) triumph in Rio de Janeiro, where, with Lula’s support, the winning coalition inflicted a defeat against Bolsonaro in his political stronghold. This is no small feat, as Bolsonarism remains very strong in the South of the country, where it won in all three capitals, and obtained expressive victory in the Central-West, in addition to its performance in some capitals in the Northeast. Nevertheless, the election and the polls show that the base of the pyramid still remains with Lulism.
The second tier is what social scientists refer to as those with a monthly family income ranging from two to five times the minimum wage. Here, a sharp divide begins. Marçal’s candidacy in São Paulo had a significant advantage in this group, although it was not his core support, which was among higher-income voters. Support for the far right increases up the income ladder. It was the same with Bolsonaro: the higher the income in these middle sectors, the more they oppose the base of the pyramid. In this respect, it is a class opposition to Lulism. From a social point of view, this is the fundamental clash at play. Those earning from two to five minimum wages are very important from a numerical point of view, representing more than 30 percent of the Brazilian electorate, while over 40 percent of the electorate remains at the bottom at two times the monthly minimum or lower. These two segments decide the election, as rich Brazilians don’t have the numbers to be decisive. But the two to five wage sector is divided. The extreme right does hold sway there, but it remains under dispute, and I would even say that this is the sector that will decide the election in 2026.
Next, we have the third tier, made up of those with a monthly family income above five minimum wages. Here, too, there is a threefold split: the far right, the right, and a small middle-class progressive fringe. The left-wing candidate in São Paulo, PSOL’s Guilherme Boulos, who was backed by Lula, faced difficulties at the base of the pyramid, but his support grew in the third tier—somewhat similar to the distribution that the PT could achieve until its breakthrough in 2002.
Finally, the fourth tier would be the dominant classes, who don’t even feature in opinion polls. They are not important from a numerical standpoint, but from a class structure perspective. It’s clear that part of the ruling class supports the extreme right, particularly in the agribusiness sector. The PL, for example, did very well in the cities with the highest agribusiness revenues—where that sector determines employment and is politically integrated in local government. This is also true among those in business and construction, which are economically important sectors. The major question is what the cosmopolitan bourgeoisie will do, given that it was difficult to get them to side with Lula in 2022. The bankers, financiers, and cosmopolitan business elites backed Lula’s candidacy in an environment of considerable tension, and the subsequent two years in office have been marked by a central governmental dispute: the problem of austerity. This sector of the bourgeoisie wants public spending to be cut, ostensibly to create a fiscal balance that will generate peace of mind for investors. Their support for Lula is accordingly very fragile, so a right-wing candidate seemingly without extreme right-wing characteristics could emerge and appeal to this cosmopolitan bourgeoisie.
HF: You’ve written about the idea of “autocracy with a fascist bias” to understand the phenomena of Trump in the US and Bolsonaro in Brazil. Could you explain this idea, and how it helps us understand the election of a more radicalized Trumpist movement in the US, the Marçal phenomenon, and the impacts of Bolsonaro’s ineligibility?
AS: From an empirical perspective, what we saw during the Bolsonaro administration was a tendency toward an autocratic regime—in a specific sense, it aimed at consolidating governance around Bolsonaro himself. This is unlike, for example, what became known as the techno-bureaucratic military regime of 1964, which had no prominent leadership and instead organized around an apparatus. By “autocratic” I mean something very particular because, by contrast, we don’t have any empirical evidence to say that he was moving towards a fascist-type regime. The fascist bias lies in having activated, or perhaps having sought to activate, the unconscious of the masses. Following the Frankfurt School’s analysis of historical fascism, communication that can activate this unconscious across class divisions are part of the “delusional system” of right-wing nationalist and fascist politics. There are many episodes of this kind of irrational, mass, communications-driven far-right movement in recent history. To give one example, in 2021 Bolsonaro’s networks started spreading the word that most of the Supreme Court (STF) ministers were receiving Chinese money to enable the legal rehabilitation of former president Lula and thereby enslave the Brazilian people to China. This was spread not as a metaphor, but as a fact. And this fact is completely delusional, outside of the realm of logical dialogue. This didn’t exist in Brazilian politics until Bolsonaro came along. It’s a novelty that typifies what I call the fascist bias.
My analysis is for Brazil, but since the question has been posed, I’m risking an opinion on the United States. From a distance it seems to me that Trump’s victory last November took place amid an intensification of this fascist bias. The promise to deport millions of people and fables about Haitian migrants eating pets in the middle of the country take part in this delusional system. This newfound phenomena presents us with challenges we aren’t accustomed to in political analysis, so it’s difficult to predict what will happen when Trump takes office, but I would expect a further deepening of both authoritarianism and this fascist bias.
Back to Brazil, it’s my view that the fascist bias was fully at play in Marçal’s campaign in the São Paulo election. It was an extremely aggressive candidacy, characterized by vicious attacks on other candidates, and viral falsehoods. He was so offensive and provocative that, in a televised debate during the campaign, another candidate hit Marçal with a chair. The scandal became known as cadeirada, roughly meaning “chairing.” In a subsequent debate, one of Marçal’s advisors punched another candidate’s publicist. Generally perceived as random explosive moments, these events were rather, in my opinion, part of a communication strategy: acts of expressive violence that activate the unconscious of the masses. That’s why the Marçal phenomenon is very significant—it represents the existence of a social environment for this type of politics.
HF: You launched a book last September, The Second Circle (O segundo circulo), which seeks to place Brazil in the world. Where does the country stand today compared to the early 2000s? How do you view Brazil in the context of increasing competition between China and the US?
AS: As a peripheral country, Brazil is subject to determinations coming from the center of the global system, but at the same time it processes these determinations through its domestic dynamics and class structure. As Professor Fernando Rugitsky has argued, Brazil’s position in the global trade system is primarily as a supplier of roughly processed raw materials for industrial use in Asia. Brazil is once again the breadbasket of the world—or a part of the world, at least. Meanwhile, the third corner of this triangle, the United States and Europe, dominate the financial and currency system in which Brazil is a subordinate party. What we don’t know is whether or not the polarization between the US and China will lead to Chinese and US-European industrial investment in Brazil. So far, there have been some Chinese industrial investments in the country, such as the BYD and Goldwind plants in Camaçari (both of which used to house American industrial giants, Ford and GE). These investments do not seem to be on a scale that would suggest structural change or a reversal of the trend towards deindustrialization. Nor, so far, have I heard about the transfer of advanced technology, which is essential if we are to think about the possibility of reversing this trend. The same question applies to the bloc led by the US in opposition to China, because Brazil, as an important country on the international stage—diplomatically and economically—could benefit from this division by negotiating concessions from both sides that point in the direction of what is a historical project for part of Brazilian society, which is to seek a definitive exit from so-called economic backwardness.
Compared to the early 2000s, when Lula won the first presidential election, Brazil is significantly more deindustrialized and reprimarized. This partly explains the reason why the Bolsonaro coalition was defeated in 2022 by a margin of less than 1 percent of the vote, despite the humanitarian catastrophe that was Bolsonaro’s management of Covid-19. There is also the further transformation of a country toward services rather than industry, something that has everything to do with Bolsonarism, which brings together ruling class groups linked to agribusiness and services. So today, from the standpoint of a development project, the situation is far more difficult than it was twenty years ago. Precarious work, superexploitation of the workforce, the progressive growth of organized crime—these are the trends from the point of view of income redistribution and the lower classes. The problem of how to organize a new program in this situation is, I would say, one of the most distressing questions of the moment.
HF: You write in this book about parallels between Brazil and the United States, about a “mimicry” across the politics of the two countries. Can you outline the main aspects of this parallelism and its implications for understanding Brazil in the world?
AS: We started with the observation that, since 2016, Brazilian politics has begun to resemble American politics. At the first level, former president Jair Bolsonaro began to literally copy all of Trump’s actions, culminating in the uprising of January 8, 2023, in which a Brazilian crowd invaded and vandalized the headquarters of all three branches of government in Brasilia—mimicking January 6, 2021 in Washington DC. This was a kind of mimetic performance, with extraordinary consequences, because many of these people are in prison to this day, paying a very high price for the delusional rallying cry that led them there.
The philosopher Roberto Mangabeira Unger says that there is no country in the world more like the United States than Brazil: the extent of the isolation of the two countries, both continental in size, both inward-looking and insolated. It is worth remembering that Brazil also has a historical tradition of turning its back on the rest of Latin America, and looking first to Europe and then to the United States. It is also the case that Brazil has historically copied other US formulas, notably the adoption of presidentialism (although this is true for several other countries in the region as well). But finally, and perhaps most essentially for our discussion, both countries have been deindustrializing in parallel.
Of course, the United States is the center of the system and Brazil is a peripheral country—the starting points are different, and the place of the two countries in productive and financial chains are different. But, curiously, both countries have been experiencing parallel consequences for neglecting domestic industry. Deindustrialization is the starting point for thinking about the strange underlying resonances in the political realm, despite immense differences in social composition, political system, and so on.
HF: What are the prospects for Lulism and left-wing politics in Brazil?
AS: Contextually speaking, I see three major challenges. The first is the fact that budget cuts in programs that provide income and benefits to the base of the pyramid could have a fatal effect on Lulism, which is built entirely on the provision of this support. Possible cuts in the minimum wage, in the Continuous Benefit Program, in salary bonuses, which affect the base of the pyramid directly, need to be carefully observed from a political standpoint. Secondly, there is a perception, common to both the United States and Brazil, that the increase in the cost of living is impacting the base of the pyramid and also the next tier up (the two to five minimum wage monthly family income group), meaning that aggregate economic figures seem to be of little importance on the scale of elections. We may observe economic growth, a drop in unemployment, and an increase in wages, but when surveys are carried out, pessimism about the economy even increases, which seems to suggest that, for ordinary people, life is still very difficult. And this may have something to do with the surge in inflation in the cost of living worldwide, due to the disruption of production chains during the Covid-19 pandemic and perhaps later the wars, as oil and energy prices have a huge impact on the entire price chain and, in particular, on the cost of living. So the second challenge is to design policies to protect the popular economy, to prevent the effects of the global economy from reaching the lower income strata. The third, and most difficult, is to draw up a program that makes it possible to attract this group of voters who receive between two and five minimum wages monthly, who are not at the bottom of the pyramid, but who are workers dealing with precarious incomes and all that come along with them. For example, an app delivery driver who works on a motorcycle in the city of São Paulo is not at the bottom of the pyramid—in the Brazilian case, he is in the middle sector and not among the poorest. What project can fight for this electorate, which has proven quite inclined to support Marçal in São Paulo? It can’t be anything other than a national development plan. But how can we think of a development plan in the adverse global conditions I described earlier? To end on an ironic note, I would say that we need to do this now. But how? I don’t know.
HF: In the first chapter of the book, you defend the use of the word “interregnum” to think about the global crisis. Could you comment on the analytical value of thinking in these terms?
AS: The purpose of the article is to reflect on the notion that interregnum, for Gramsci, means a period of struggle between forces that don’t have hegemony, but seek it. It’s not just the idea that chaotic periods lead to a new settlement. We take a very political angle of looking at the interregnum as a period of dispute between these forces. From our vantage point, we sought to interpret the Biden phenomenon as an attempt to create a new, organizing vision of Americanism. It’s not clear to me that all of these attempts have been lost with the electoral defeat, but it will now be replaced by Trumpism, seeking to put forward a counter-direction to resolve the same set of problems. For example, there are a number of analyses that point to the very difficult living conditions of the average American citizen, not to mention citizens at the very bottom of the US’s own class pyramid. How will Trump deal with this? In global terms, the competition over the new hegemony is taking place in two directions—inwardly and outwardly. For Biden, this was attempting new domestic economic policy while pursuing belligerent foreign policy. When it comes to China, the focus must be on what it is proposing for the global South, and at the same time, for its own domestic economy. Thinking about the “interregnum” is about focusing on the direction of these forces, in a moment when there is no defined hegemony.
This interview was translated from Portuguese to English by Marina Vello.
Since 1999, the European Union (EU) and Mercosur have been negotiating a bi-regional partnership agreement comprising three pillars: trade, cooperation, and political dialogue. A quarter century later, in December 2024, the parties announced the conclusion of negotiations during the Mercosur Summit in Montevideo, attended by European Commission President Ursula von der Leyen. Before implementation, the agreement will undergo legal scrubbing for national ratification processes. The European Union has opted for a split approval: the trade dimension of the agreement requires only European Parliament approval, while political and cooperation aspects must be submitted to national parliaments. Within Mercosur, though each country’s parliament must ratify the text, the agreement can take effect bilaterally between the EU and individually approving Mercosur nations.
A previous version of the deal was announced in 2019, under the Mercosur leadership of Jair Bolsonaro. Latin America abandoned those negotiations after the EU introduced new environmental regulations. While Bolsonaro opposed these measures, they were also widely viewed throughout Mercosur, including by progressive factions, as protectionist on the part of the Europeans. Negotiations resumed in 2023 with Lula’s new term. Although more moderate, the new text still faces criticism from organizations and governments on both sides of the Atlantic.
In the European Union, resistance comes primarily from agricultural sectors in France, the Netherlands, and Poland, which fear competition with Mercosur’s producers. In South America, concerns arise mainly from civil society and academia, centered on the agreement’s potential to undermine current reindustrialization efforts within Mercosur countries, reinforcing their export profiles focused on primary goods. Compared to 2019, the current version maintains greater freedom for the national implementation of public policies and public procurement requirements, enhanced environmental commitments, new review and “rebalancing mechanisms” in the case of disputes, and extended deadlines for trade liberalization or tariff removal in certain sectors.
Phenomenal World’s senior editor Maria Fernanda Sikorski spoke with Marta Castilho, professor of economics at the Federal University of Rio de Janeiro and coordinator of the Research Group on Industry and Competitiveness (GIC-UFRJ), about the agreement’s perspectives for Mercosur—and Brazil, in particular—and the risks of trade liberalization for South America’s national and regional development. The conversation has been edited for length and clarity.
An interview with Marta Castilho
Maria Sikorski: Could you describe how the political and economic environment evolved during the partnership’s negotiation period, from 1999 until its conclusion in 2024? Why did the agreement remain relevant, and how did EU-Mercosur trade relationships change during this time?
Marta Castilho: When negotiations began, the European Union was a bloc of fifteen member states. Mercosur had aimed to gain preferential access to the European Union over Eastern Europe, which then had industrial structures relatively similar to ours. Eastern Europe, however, eventually became closely integrated with Western European industry. This might have been the most significant change since negotiations began, at which time the horizon was a little more encouraging to our industry.
Since the beginning, Mercosur saw an opportunity to increase exports of agricultural products. Domestically, the agreement was supported by interests linked to agribusiness, while industrial sectors took a more cautious approach, advocating for a gradual trade opening as they feared increased competition from European manufacturing.
Additionally, it was important to consider that European companies maintained a strong presence in the region through multinational subsidiaries, and their positions had, let’s say, “mood swings” throughout negotiations. For example, one of the world’s largest poultry producers, a French company with operations here in Brazil, initially supported trade liberalization because their aim was to raise chickens in Mercosur and export the meat to Europe. This is in contrast with current objections coming from France. Similar shifts occurred across various sectors. The automotive sector is another significant example, as is the chemical sector and its various subsectors, due to the strong presence of European companies in our region. In general, Europe showed great interest in opening Mercosur’s industrial products market and facilitating service flows. In contrast, there was stronger resistance to agricultural product imports.
MS: An earlier version of the agreement announced in 2019 never received European Parliament ratification. What are the main changes in the current text?
MC: One relevant factor is that in the five years between 2019 and 2024 the Covid-19 pandemic happened. By 2019, European countries were already signaling a return to industrial policies, with new strategies focused on “Industry 4.0,” digitalization, and related areas. The pandemic exposed some of these countries’ vulnerabilities, leading them to explicitly adopt policies targeting localized production and reducing foreign dependency in specific sectors and segments. This shifted the EU’s trade interests in the agreement and the overall negotiating conditions between the blocs.
The shift particularly affected the interest in minerals, especially critical minerals. Mercosur is extremely rich in mineral sources—in this regard it is a paradise. One of the most recent shifts is Europe’s increasing attraction to the region’s minerals. The EU has taken a dim view of any initiative inside Mercosur countries to protect or tax these mineral exports, but Mercosur has been strategic about the critical minerals sector, ensuring the possibility of imposing conditionalities.
In Brazil, there is an ongoing debate about this matter. The discussion is not closed, and perspectives vary, for example, between the government of the State of Minas Gerais and parts of the Federal government. The discussion centers on developing a strategy for critical minerals beyond its exploitation and export as raw material, to focus on increasing processing capacity and, ultimately, manufacturing batteries and other goods domestically.
Another change between the 2019 and 2024 texts concerns public procurement. Mercosur secured the right to use this mechanism as a productive development policy. While Europe has long employed public procurement, the 2019 agreement eliminated the possibility of Mercosur using certain mechanisms. Mercosur managed to renegotiate this, bringing the agreement’s terms much closer to the bloc’s existing rules. This was one of the most positive aspects of the renegotiation.
MS: What are the implications of separating the agreement’s trade, political, and cooperation pillars, given that trade provisions take effect after the approval of European Parliament and Mercosur national parliaments, while political and cooperation clauses require approval from each EU national parliament?
MC: The partnership agreement follows a European tradition of handling non-trade aspects in negotiations of this nature, unlike the Anglo-Saxon tradition, for example. This is the reason why the EU-Mercosur agreement has a trade component, a cooperation component, and one for political dialogue. This is a positive aspect of the agreement because, for example, cooperation provisions could compensate for certain trade-related losses. Trade opening can be compensated by prospects for cooperation in technical development in areas in which Europeans are more advanced, such as technology, and in fields where we can exchange, like bioeconomy and tropical medicine.
Now, for pragmatic and strategic reasons, the agreement has been split up. This is because a trade agreement is easier to negotiate and approve. The procedure, even within the EU, is faster: if it’s just the trade portion, it doesn’t require approval from all member-state parliaments but only the European Parliament. A comprehensive partnership agreement would need to go through all national bodies—a process that could be delayed by the disagreements we’ve seen in France, Poland, and the Netherlands, for example. For the Europeans, it’s a pragmatic matter. But for Mercosur, in my view, it’s short-sighted, as the bloc misses the opportunity to benefit from potential gains that would be made possible by other aspects of the agreement, especially cooperation.
MS: Because it is possible that only the trade agreement obtains approval while other pillars remain indefinitely postponed.
MC: Precisely, because there is no incentive to approve. You won’t put to a vote something you know won’t be approved. European interests are already covered by the trade agreement. For example, some environmental rules added to the current text—such as the Carbon Border Adjustment Mechanism (CBAM) for disputes and the reforestation mechanism—do not affect the main European legislation: they are exempt from the trade agreement.
MS: Let’s discuss the trade agreement’s key aspects and their impact on different Mercosur sectors. Can we start with the part about tariffs and tariff rate quotas?
MC: The trade agreement covers various regulatory domains. One of them is tariffs and tariff-rate quotas—quotas are technically non-tariff barriers, but they are typically addressed together. The quotas are largely used for agricultural products: a lower tariff is applied for a certain amount of exports within the agreement, and anything exceeding this quota is charged with standard partner-country rates. Mercosur countries adopt a common tariff for agricultural products. The current agreement maintains an array of tariff-rate quotas from the 2019 text. Certain products see increased quotas and reduced in-quota tariffs. In other situations, the in-quota tariffs were reduced, but the established quota is lower than the amount we were already exporting in 2019 and 2020. Moreover, there are mechanisms which allow Europeans to review these quantities—another preserved aspect of the 2019 text. While Mercosur may gain improved access to the EU agricultural market, trade liberalization is not as impactful as some sectors hope or proclaim.
MS: Considering the volume of our current exports?
MC: Exactly. But some segments will benefit. Take beef producers, for example—it’s no surprise that French farmers are highly reluctant, as beef is one of the products receiving expanded quotas and reduced tariffs. Rice was one of the products for which both quotas and tariffs on imports into Europe were reduced. There are various situations among agricultural products.
MS: What about Mercosur’s industrial goods?
MC: That’s our biggest problem, for several reasons. European tariffs on industrial goods are already quite low: in general, they average around 5 percent, while ours will settle near 13 percent. Potential tariff reductions by the Europeans on our exports there are modest and Europe’s existing trade agreements with other countries further limit our preferential margin. On top of that, there’s a significant asymmetry, both in terms of competitiveness and scale of our industrial sectors. While we lack the competitive advantage to significantly penetrate European markets, their potential gains from trade liberalization are much greater.
MS: The general perception in critical assessments of the agreement suggests that Mercosur’s agribusiness would benefit significantly while industry would struggle. But from what you are saying, the agricultural sector doesn’t necessarily gain that much, except in specific products.
Given this scenario, what implementation conditions would help South American industry benefit, or at least mitigate negative impacts of competition with European industry?
MC: The trade and tariff liberalization is already set and will likely be implemented. What this means is that, in trade terms, there’s little to be done. On the one hand, we need to enhance domestic industry productivity and competitiveness—and that’s our own responsibility, which involves conceiving industrial and productive development policies, making strategic use of public procurement, and implementing technological policies. On the other hand, we can also make use of certain adjustment mechanisms within the agreement, such as the rebalancing mechanism. The revised text added certain safeguard mechanisms against occasional surges of products and abrupt inflows in specific sectors. While specific instruments await definition, at least the deal preserves adaptation possibilities.
Nevertheless, competition between our industrial production and Europe’s remains inevitable. What we can do is leverage available domestic tools to enhance our industrial competitiveness, while utilizing both national and agreement-based trade mechanisms.
MS: Tariffs represent a crucial tool for protecting and strengthening domestic industry in order to become competitive, especially for countries like those in South America. Doesn’t an EU trade agreement of this nature undermine efforts toward reindustrialization in the region?
European companies enjoy technological and productive superiority, better credit access, and stronger state support. Brazilian companies, conversely, face extremely high interest rates, scarce credit, currency instability, and logistical and infrastructure challenges. Aren’t we giving up a crucial industrial policy tool? Could this agreement reinforce Brazil’s trend of returning to a primary-export-based economy as has taken shape in recent decades?
MC: Absolutely. The agreement impacts it in both short and long-term. Short-term effects stem from tariff reductions. Even though the timeline for vehicle tariff reductions was extended, particularly for those with new technologies— the tariff reduction schedule for electric vehicles, for example, could extend up to 30 years—the current version doesn’t seek to revise the tariff reduction promised in 2019. We gave up on an instrument that could strengthen domestic industry in relation to a stronger trade partner, further complicating reindustrialization efforts.
Beyond tariffs, other crucial domains include public procurement, questions related to intellectual property, and so on. Securing public procurement mechanisms represents a significant achievement for Mercosur, and it’s worth noting that this is a hallmark of the current Brazilian government in the text. They insisted on this point, and now we will explicitly use it—just as developed countries do. This mechanism is particularly interesting, because it not only enables state support for specific sectors through preference margins and conditionalities but also helps to prompt certain practices—for example, requiring public procurement to be sustainable encourages suppliers to adopt sustainable practices. This applies both to domestic and foreign companies: if an international company wants to become a government supplier, it could, for example, face technology-transfer requirements.1
As for the intellectual property section, I get the impression that there haven’t been significant progress or reversals compared to 2019, which established slightly stronger commitments than those already made by WTO countries, but not much more than that.
Compared to previous versions, it seems that until around 2013 or 2014, the Brazilian government approached negotiations with a clear strategic vision centered on productive development and autonomy. That continuously shifted until 2019. While we might see some improvements now, the text retains several elements negotiated under a strongly liberal framework. The trade chapter, for example, has remained largely untouched.
MS: How might the agreement impact Brazil’s reindustrialization efforts?
MC: The trade part of the agreement undermines reindustrialization efforts targeting a more technologically dynamic and autonomous productive development. While some domains—such as public procurement and certain safeguards and rebalancing mechanisms—represent progress compared to 2019, they are insufficient.
Brazil’s large consumer market and position as South America’s export platform demand special consideration. So, it’s the Brazilian government’s role to try to impose conditionalities to compensate agreement-related losses. The mining sector offers a prime example. The government can potentially intervene in the conditions of mineral exploitation within national territory. There’s some room for negotiation with investors—for instance, by stipulating that certain advantages can only be accessed if more production stages occur domestically. However, this will depend on the domestic management of industrial, technological, fiscal, and tax policy instruments. It will also hinge on macroeconomic conditions, including growth potential and interest rate dynamics.
Moreover, it is important that the Brazilian government shares its advantages with other Mercosur countries. The problem with this agreement is that it tends to reinforce a pattern of growing regressive specialization, which has intensified since the 2000s across Brazil and the region. Comparing Brazilian exports to the EU in 2003, 2013, and 2023 reveals the increasingly primary nature of our exports profile. And the agreement tends to reinforce our specialization in agricultural and mineral products.
Order
2003
2013
2023
1
Soybeans, whether or not ground
Iron ores and concentrates, including roasted iron pyrites
Petroleum oils and oils obtained from bituminous minerals, crude
2
Soybean oilcake and other solid residues from soybean oil extraction
Soybean oilcake and other solid residues from soybean oil extraction
Soybean oilcake and other solid residues from soybean oil extraction
3
Iron ores and concentrates, including roasted iron pyrites
Soybeans, whether or not ground
Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion
4
Fruit juices (including grape must) and vegetable juices, unfermented, not containing added spirit, whether or not containing added sugar or other sweetening matter
Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion
Soybeans, whether or not ground
5
Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion
Chemical wood pulp, soda or sulfate, other than dissolving grades
Copper ores and concentrates
6
Chemical wood pulp, soda or sulfate, other than dissolving grades
Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils
Iron ores and concentrates, including roasted iron pyrites
7
Meat and edible offal, of the poultry of heading 0105, fresh, chilled or frozen
Petroleum oils and oils obtained from bituminous minerals, crude
Chemical wood pulp, soda or sulfate, other than dissolving grades
8
Unwrought aluminum
Fruit juices (including grape must) and vegetable juices, unfermented, not containing added spirit, whether or not containing added sugar or other sweetening matter
Fruit juices (including grape must) and vegetable juices, unfermented, not containing added spirit, whether or not containing added sugar or other sweetening matter
9
Petroleum oils and oils obtained from bituminous minerals, crude
Unmanufactured tobacco; tobacco refuse
Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils
10
Unmanufactured tobacco; tobacco refuse
Copper ores and concentrates
Ferro-alloys
Thus, strengthening regional industrial coordination within Mercosur becomes crucial. Despite obvious political challenges, the existing coordination in certain sectors should not only be preserved but further reinforced—including through public procurement mechanisms or regional funds, enabling the bloc to enter more cohesively in this EU “partnership.” The Uruguayan government, for example, is delighted with the agreement—particularly because the liberal government that took part in the negotiations was fond of the specialization.2 Their beef exports do not face the same environmental problems as Brazilian production in the Amazon and Cerrado regions. For Brazil to maximize agreement benefits, coordinating with its neighbors and creating strategies to transfer part of the gains is desirable, as it could facilitate alliances with these countries and boost bloc-wide industrial production.
MS: The Brazilian government’s official position claims the agreement offers several advantages to Mercosur. The Ministry of Development, Industry, Trade and Services, for example, highlights greater access to the European market—which could attract additional foreign direct investment—and reduced domestic costs for industrial inputs and capital goods—since we could import them duty-free. Improved international competitiveness of our products is the ostensible result. They argue this would strengthen trade partnership diversification, industrial modernization, integration with EU production chains, and spark interest from other actors in negotiating new agreements with Mercosur to access this market. How do you view this argument?
MC: This is a very old argument on trade liberalization. It is the same one used in the 1990s, claiming that we can import to export, that liberalizing imports might provide productivity gains through the import of cheaper inputs and capital goods. This would allegedly lead to competitiveness gains for the domestic industry, turning the country into an exporter of manufactured goods. However, since then, Brazil and the region have increasingly exported less sophisticated goods. In short, our major liberalization attempt implemented in the 1990s provided no evidence of the positive effects of trade opening on exports.
I doubt that this time the Brazilian economy will achieve a great virtuous cycle of economic growth driven by direct investment or increased export competitiveness through greater access to European inputs, particularly in the current context. Will we integrate into European value chains? No, we won’t. Europe has already established its chains and is attempting to shield itself from Chinese and other Asian countries’ entry, trying to consolidate these chains as much as possible within European borders. Our role will likely be further specializing in raw materials supply for these chains. The foreign investment we might attract relates to companies looking to take advantage of specific domestic factors, such as natural resources and a broad regional consumer market. But this does not necessarily translate to industrial modernization.
This article was translated from Portuguese to English by Glenda Vicenzi.
The ideas of the Jamaican political leader Michael Manley had a global impact that continues to be felt today. As the leader of the People’s National Party (PNP) from 1969 to 1992, and particularly in his first period as prime minister of Jamaica from 1972 to 1980, Manley promoted a wide range of ambitious reforms that were guided by strongly articulated ideas of democratic socialism and economic decolonization. He recognized that Jamaica, like many other countries, had gained constitutional independence, yet remained wedded to a world economy structured by colonialism.
Manley therefore sought to pursue these ideas on an international level. Along with other leaders such as Tanzania’s Julius Nyerere, as one of the leading spokespeople in the 1970s for a New International Economic Order (NIEO) based on more egalitarian principles through cooperation among countries in the global South. Despite the successful implementation of many reforms, Manley’s policies faced strong opposition both from groups within Jamaica and from international actors, most notably the United States. His government struggled with the difficult economic circumstances of the 1970s, and lost elections in 1980 after several years of austerity that came as a condition for loans by the International Monetary Fund (IMF).
Anthony Bogues is the Asa Messer Professor of Humanities and Africana Studies at Brown University. He has written extensively on Caribbean and African intellectual, cultural and literary history and political thought, including the life and political ideas of Michael Manley. In the late 1980’s he was also an advisor to Manley. More recently, he has supported efforts to rethink the political vision of the People’s National Party.
In this interview, Bogues reflects on the life and legacy of Michael Manley, whose hundredth year birth anniversary was celebrated last month. Considering Manley’s influence in both Jamaican and internationalist politics, the conversation explores Manley’s political formation in the Jamaican labour movement, his ambitious efforts to decolonize the Jamaican economy, as well his efforts on the global stage, on issues ranging from the US embargo of Cuba to the IMF. Bogues discusses inheriting a generational burden to rethink the philosophical vision of democratic socialism in Jamaica, expressing hope for a united Caribbean.
An interview with Professor Anthony Bogues
will kendall: Can you tell us about your relationship with Michael Manley? How did you first meet him, and how did your relationship develop?
anthony bogues: I met him formally after the 1980 election, which was a critical moment in Jamaican history. The year of the election was a period of political crisis and immense violence—over 800 people died between the beginning of the year and the election in October. From the late 1970s onwards I was a left-leaning journalist working at the Jamaican Broadcasting Corporation. The election was in October, and with the conservative Jamaica Labour Party in power I was fired in December. During the election campaign, myself and other journalists were threatened by the conservatives that we would never work in Jamaica again. Myself and a colleague, Brian Meeks, took the government to court and won a case for unfair dismissal.
So after my dismissal the question was: what was I going to do with my life? I considered doing a PhD. But I was approached by two leading members of the PNP, the party’s then general secretary, DK Duncan and the now former wife of Michael Manley, Beverley Manley, asking me to come and work for the Party as a researcher. I said yes, and that decision led me to work for the Party secretariat. I became the secretary of the Political Education Commission of the Party, and that is the role in which I met Michael Manley. We became very close over the years. When he became Prime Minister in ‘89, he asked me to come to Jamaica House—the country’s 10 Downing Street if you will. I still wanted to do a PhD, but I ultimately agreed. We had our political disagreements, but our relationship deepened. I worked with him as his special assistant and what is today called a chief of staff.
In this capacity we travelled to many meetings. On one occasion, he had to visit the White House. Typically, on those occasions the Prime Minister would be joined by the Minister of Foreign Affairs, but Manley wanted me there in the private meeting in the Oval Office with President Bush Sr. When the meeting began, I understood why Manley wanted me there. There were three main items on the agenda. The first was the drug problem which was beginning to create real problems for many Caribbean states. The second was about the multilateral debt of Jamaica and the region. The third was to ask the US to lift its embargo on Cuba. The plan was that Prime Minister Manley would go speak to Fidel Castro. Former President Carter would then visit Cuba to advance the negotiations. And the White House would stay out of it until it was clear that the conversations and negotiations had arrived at a certain point. The one US condition was that Cuba would release a number of political prisoners.
After that meeting, we went to Cuba and spoke to Fidel who said, “We don’t have any political prisoners.” When we conveyed that to Brent Scowcroft, the US National Security Advisor, the deal fell flat. Those are the sort of things Michael and I were involved in and the foundation for our relationship. We remained close long after he left office. When he passed away, I was doing my postdoc in the United States at Howard University, and I flew back immediately to help organize his funeral.
WK: Can you paint a picture of the social and political environment that Michael Manley came of age in? On the one hand, there’s the the class and racial contexts in Jamaica, such as the “color-classism” of the planter class, and on the other hand, there’s the “political unionism” of the labor movement and its relationship to the two mass parties.
AB: Michael was born in 1924, when Jamaica was still firmly in the grip of British colonialism. He was born to an upper middle-class family and his father was one of the most important lawyers in the entire Caribbean. His mother, who was born in the United Kingdom, became a widely revered artist and very important in Jamaica’s artistic community. Both of his parents lived their lives according to a powerful ethic of public service. She was known for challenging the racial colonial representation of Black people in the colonies. One of her most important works was called Negro Aroused. His father Norman Manley actively served working people alongside his list of very important clients. Living in London as a Rhodes Scholar, Norman Manley also developed Fabian Socialist ideological views.
In 1938, major workers’ riots broke out across the country as well as across the Caribbean. The strikes prompted Britain’s colonial office to reflect on how it would manage this emerging trade union movement. Prior to ‘38, we had the Universal Negro Improvement Association in the Caribbean, which was founded by Marcus Garvey. That is important because many Garveyites later joined the People’s National Party (PNP). After the labor riots in the 1930s we had the Bustamante Industrial Trade Union (BITU) and the PNP led by Norman Manley—an organized labor movement, and a nationalist anti-colonial movement. That was the political configuration of the time.
I have argued that the PNP was a mass anti-colonial movement that transformed itself into a political party in 1944 with the advent of universal adult suffrage. The BITU was a mass trade union movement linked to Bustamante, who was originally a member of the PNP. He was imprisoned for his union activities and left the party upon his release, forming the Jamaica Labour Party (JLP) in 1943. So the union movement is attached to that party, and so when Bustamante leaves the PNP, Norman Manley and others in the PNP leadership form the Trade Union Congress as a counter to the BITU. So both parties in the 1940s were rooted in organized working-class activities. You can say following conventional labels that the JLP is center-right and the PNP is center-left, but it’s important to note that both parties engaged in a relationship with mass movements that no longer exists today.
The PNP also had immediate connections to the British Labour Party and Fabian Socialism. Stafford Cripps, the left leaning former Chancellor of the Exchequer, was present at the PNP’s inaugural conference. So while at its birth the PNP’s primary objective was political independence, it also had a socialist foundation.
Michael grew up in this environment, he would come home and hear his father’s political arguments. Both his mother and father were both actively involved in public life. He attended the same elite colonial school that his father had gone to, Jamaica College, after which he briefly studied at McGill in Canada before moving to London. At the LSE, his greatest influence was the English Socialist and later chairman of the Labour Party Harold Laski. Initially, under the influence of his mother, he had wanted to study Art criticism, but by the time he finished the Latin requirements he ended up opting for a degree in Government/ political science.
Laski’s left-wing socialism, which was to the left of the Labour Party at the time, enormously shaped his thinking. As did the cohort in the West Indian Students Union—which included figures like Errol Barrow, later Prime Minister of Barbados, and G. Arthur Brown, later governor of the Bank of Jamaica. Elsa Goveia, the extraordinary Guyanese historian who became the first chair of West Indian History at University of West Indies, was also there. This was not the generation of the ‘20s and early ‘30s who had come to London, people like CLR James, George Padmore, Amy Ashwood Garvey as well as the cricketer Learie Constantine. It was an explicitly anti-colonial generation who came together in the ‘40s and ‘50s in London, primarily as students. It was also a Federalist generation. They thought of themselves as not only participating in the separate political life of Guyana, Barbados, and Jamaica, but advancing a Federation of the Anglophone Caribbean.
By the time Michael returned to Jamaica in the late 1940s, he had abandoned his dream of being an art critic and he decided to pursue a career as a political journalist. He started working for a newspaper called Public Opinion, publishing a remarkable column called “Root of the Matter.” Politically, he became an ordinary group member of the party and when the party split in 1952, he began to play a more active role. This split was brought on by the increased pressures of the Cold War. In Jamaica, during the period of anti-colonial twentiethcentury agitation Soviet-aligned Marxists led by Richard Hart and others along with the radical leftist Ken Hill had become incredibly influential both within the PNP and within the labor movement . The Right of the Party became increasingly concerned with getting the Marxists and left-wingers out, and they did so during the party conference of 1952.
After the split, Michael became part of an internal campaign which sought to articulate the difference between communism and democratic socialism. In this process, his political ideas were sharpened by attending hundreds of Party groups and listening and participating in the debates between Party members. At this point, he’s a journalist and a minor figure within the Party. But I would argue that his subsequent participation in the labor movement was perhaps most formative. He was brought into the labor movement through an invitation to observe negotiations by a PNP member and trade union leader. The story goes that at the negotiation meeting, the leader unexpectedly exited and left Michael in charge of the discussion. Hearing the list of worker grievances at this meeting is what turned him into a trade unionist. It’s his work in the sugar and bauxite belt that brought him in contact with the organized working class and shaped him into the politician he was.
Neil Warner: After Manley became prime minister, his government pursued a large number of ambitious reforms. Manley described his economic and political approach as an attempt to pursue a “third path,” contrasting it to the Puerto Rican Model—which Jamaica had initially pursued and which focused on seeking to attract overseas investment—and the Cuban Model—which was based on Marxism-Leninism and central planning. How would you describe this approach? What would you say were the most important and successful of these reforms?
AB: As I mentioned, Michael Manley’s upbringing is enormously shaped by the anti-colonial struggle. But after Jamaican independence was granted in 1962, Jamaican society did not decolonize in any substantive form. The plantations were still powerful and racial and class hierarchies remained intact. The dominant social order was constructed around black oppression drawn from the various structural legacies of the colonial order.
As a result, decolonization remained one of Manley’s core aims into the 1970s. But you couldn’t pursue decolonization without raising fundamental questions about equality, justice, and the structure of the national economy. Inhis first book, The Politics ofChange, Manley elaborates ideas on changing the actual colonial structure of Jamaican society. That involved overturning colonial laws like the Master Servant law, putting forward public programs like free education, and bringing ordinary Black people to the centre of Jamaican society. In his political practice, he attempted to dismantle the legacies of the old colonial order.
So it’s a period of, on the one hand, what Rex Nettleford calls “somebody-tization”: how the Black person becomes somebody. On the other hand, it was a period of reorganizing the Jamaican economy. Sugar was one of the most important industries in Jamaican society. In the decolonization process, a question emerged: Could those workers, whose ancestors had been slaves, participate in redesigning how the industry would operate? This was both a historical and political question given the island’s history as a slave sugar-producing colony. In the late 1970s, myself and others went to Westmoreland, a sugar-producing area, to help turn that land over to workers so it could function as a cooperative. That was just one of the programs Michael had put forward. Another was on literacy. Nearly 80 percent of the Jamaican population was illiterate as a result of British colonialism. Young people like me at the time were deeply involved in these programs that the Manley government had created.
In his negotiations with bauxite companies, Michael Manley opted for bargaining higher rates of compensation over nationalization. Bauxite is an extractive industry and as a result it is finite, so it made sense to get the best conditions we could during that period of extraction. How do I summarize the 1970s reforms? What I’ll say is that Michael Manley pursued a program of full decolonization.
All of these reforms made many members of the Jamaican national elite very uncomfortable. When low wage workers are given a minimum wage and domestic workers are granted rights, things just can’t continue to operate in the way they had before. In other words, when the power balance begins to shift, the elites become jittery. By the 1980s, elite opposition and opposition from multinationals had crystallized. As recent documents from the US National Security Agency demonstrate, the US also became concerned, and it is now clear that it acted on these concerns. Remember now this was the middle of the Cold War. Moreover, Michael supported Cuba and its intervention in Angola on behalf of the radical People’s Movement for the Liberation of Angola (MPLA). The MPLA at the time was struggling against South African expansion, which would not only spread apartheid but also weaken the anti-apartheid struggle within South Africa. All of these things came together in the 1980s.
Nw: This year is the fiftieth anniversary of the declaration of the New International Economic Order (NIEO), a program led by countries in the global South for a restructuring of the rules of the international economic system to end economic colonialism and dependency. Manley was known as one of the most influential advocates of the NIEO. Can you talk about Manley’s role in the NIEO?
ab: Manley realized that even though countries like Jamaica had gained constitutional independence, they remained wedded to a world economy structured by colonialism—what people like Kwame Nkrumah would call “neo-colonialism.” Transforming the world economy depended on altering price setting mechanisms and developing technological and energy independence. We grow the commodities, but we don’t set the prices and we rely on importing machinery and oil to process them. Because he was deeply invested in political and economic democracy, Manley was also very concerned with the rise of multinational corporations.
These problems could only really be dealt with through what Julius Nyerere of Tanzania and others called the Trade Union of the Poor. At the core of the NIEO was a new economic world order. It was based on the idea, as elaborated in 1979 in Arusha, Tanzania, that there was the need “to complete the liberation of the Third World countries from external domination.” Third World countries therefore had to band together to gain a say in the structure and operations of the world economy. Julius Nyerere and Michael Manley were a tag team in the NIEO. Both grew up in former British colonies. One had studied at Edinburgh University, the other in London. And importantly, they shared the sense that a real threat to postcolonial societies was the rise of a domestic elite that would mimic the old colonial rulers. Nyerere developed the Arusha Declaration, which was really about cauterizing the power of the new elite and their capacity to corrupt the state. Michael didn’t get that far, he was operating in a different political culture. But his ideas on socialism and decolonization were about constraining the power of the elite to leverage the state for their own purposes.
The NIEO ends up gaining the support of Willy Brandt and others in the Socialist International. James Callaghan, who was then Prime Minister, ultimately came on board. This became an international campaign to get the world to think about the structure of the global economy and alter it in a way that will benefit newly independent countries. This was not entirely the same as the Non-Aligned Movement, which was a political movement more than an economic one. The Non-Aligned Movement was transformed by Nyerere and Manley into a robust movement that challenged both the economic and political structures of the world at that time.
WK: You have spoken about the trauma of two defeats in the Caribbean—Michael Manley’s 1980 election loss, and the defeat of the 1983 Grenadian revolution. These were political, ideological and military defeats. Manley was prime minister of Jamaica for a final time from 1989 to 1992. This time, his government seemed to have been more reconciled to capitalism. How did he think about that change?
ab: The problems Jamaica faced with the IMF were global problems. There was a sophisticated analysis of these problems coming out of the journal Development Dialogue in a special issue edited by Tanzanians and Jamaicans. Within the PNP, you also had a huge debate about the IMF. The IMF was one of the core entities ensuring that Manley would lose the election. The structural adjustment programs were very harsh, and they explicitly called for the reversal of the reform program that he had initiated. This, combined with oil prices, political destabilization, and rising violence, all contributed to his defeat.
Let’s think about the 1980s. There are three key figures in the world during this decade: Margaret Thatcher, Helmut Kohl, and Ronald Reagan. They were united in their intention to shut down every progressive movement, domestically and internationally—whether it was the miner’s strike, the NIEO, or the anti-apartheid movement. These three individuals had an ideological view about what society should be. To quote Maggie Thatcher, “there is no society, there are only individuals.” Stuart Hall called this moment a revolution in ideas and social practices.
After Manley’s defeat in 1980, there was a meeting in Cancún in 1981 chaired by Reagan. Julius Nyerere attended to represent the NIEO arguments. When they got to that part of the agenda, Ronald Reagan said: “next item.” No one protested. That is what was reported back to Manley and he started to realize that the world had dramatically shifted. But he was still a politician, he had to lead his party to victory.
We had numerous conversations during this period. The way he put it to me was, in the words of Hamlet, “time is out of joint” for people like him. In his view we couldn’t, as an island of 2.5 million people, go against the tide on our own. So the new question was not abandoning all hopes of transformation, but rather how do we ameliorate the worst effects of the market? I want to emphasize that this was not a trajectory that he embraced with enthusiasm. But it was the only realistic path he saw.
There are many unpublished stories from this period. I’ll just recount one. When the PNP entered into office in 1989, one of the first things we did was go around to all the Socialist International countries. Michael met Felipe González in Spain and he told him that we’ve got a serious problem with foreign exchange, and we didn’t want to go to the IMF: “Can you help us out?” Gonzalez said: “talk to our finance minister.” That’s what they all did, they left it to the finance minister because they could not say yes. Every finance minister then asked if we had a standing agreement with the IMF.
Manley then sent me to the multilateral Inter-American Development Bank to negotiate a less onerous deal. There were some Latin American figures there, and we also had a Jamaican who was high up in the bank. I went to Washington to have breakfast with them. The first thing they said to me is that we had to privatize the Jamaica State Trading Corporation. That agency was scouring the world to purchase cheap pharmaceuticals and deliver them to public hospitals. In searching for arguments against this, I told them that if we put this before parliament, the public would turn against their intervention into our national sovereignty. And you know what they told me? They said, “as a debtor country, you have no sovereignty.” I put my knife and fork down, left the meeting, and told the Prime Minister that this was not going to work.
Manley became ill and retired, I finished my PhD, and we continued our regular discussions. As he got older he grew more and more convinced that the democratic left (and this is his phrase) had to assert a counter narrative to the neoliberal dogma. We even started working on a book together about the need for a distinctive kind of democracy and what would be the ideological and philosophical basis of a modern democratic left. But as his illness worsened the project fell to the sidelines. To be very frank, I felt I shouldn’t do it without him.
WK: More recently you led a commission that came up with a rethinking and restatement of the philosophical vision of the PNP. What was behind that rethinking and how did you find that experience? How are you thinking about sovereignty now?
ab: Once Michael Manley formally retired, people like myself began to feel that the party lost its vision and ambition to transform Jamaican society. We began to walk away. But a couple of years ago I was asked by members of the new leadership to help them revive the Party’s philosophical identity. I said yes for two reasons: One, which I said publicly, was because Michael had made it clear in our many discussions that it was my generation’s burden to put progressive and deep democratic ideas back on the agenda. Second, I felt that those of us on the left really did need to begin to do some of the work that Manley and I had begun to discuss before his death. It was an opportunity to work with a group of comrades and articulate where we stand.
To do this, I followed a democratic model of politics. I spent a lot of time in constituencies. I was back and forth between the US and Jamaica, doing surveys, interviewing people, doing deep listening. After that process was completed last year, we wrote up our impressions and submitted a document titled “ Where we Stand,” which was approved by the Party. We then set about translating these principles into economic policies. We received 602 recommendations from the party delegates at the last September annual conference about how to restructure the Jamaican economy. I can’t share that with you yet, but I think it is safe to say that there is a foundation for the process of transforming Jamaican society. However the jury is out on whether we will succeed.
The question of sovereignty remains important. I go back to the Caribbean writer and novelist George Lamming, who argued that the question of sovereignty is central for us in the Caribbean. And if you ask me, I would say to you that the only real sovereignty that we can have in the Caribbean is a Caribbean that is united. I mean the entire Caribbean, Anglophone, Francophone, Hispanic, Dutch and so on. It must first emerge in the imagination, through a belief that we are not overwhelmed by external economic and political forces. We have to imagine things beyond that which is given. And we must be united in doing so, because the structure of the global economy does not allow for individual sovereignty in the economic sense. The matter of sovereignty begins then with a political horizon. It will demand of us in the Caribbean a series of joint economic ventures as well as building the capacity to intervene in the world at the level of global politics. This means configuring new global relations and alliances outside of big power politics. There are still superpowers which dominate the globe but given the current multiple crises, new forms are called for. I think that is one of the contemporary legacies of Michael Manley.
Comments Off on Normalization and the Future of the Middle East
Before October 7, 2023, the pursuit of diplomatic and economic normalization between Israel and Arab states appeared to be the central trajectory for regional politics in the Middle East. With the prospect of an Iran deal buried, this path represented American designs for the region—in a bipartisan consensus launched by Donald Trump’s Abraham Accords and carried forward by the Biden administration. For Saudi Arabia, a pivot toward relaxing tensions with Iran while pursuing normalization with Israel was also the order of the day. All signs seemed to give National Security Advisor Jake Sullivan permission to blithely declare, a week before Hamas launched its incursion into southern Israel, “The Middle East region is quieter today than it has been in two decades.”
When October 7 happened, then, it’s no wonder that speculators immediately wondered if Hamas was seeking to smash the trajectory and prevent Saudi Arabia from joining its Gulf neighbors UAE and Bahrain on the short list of Arab states who have normalized relations with Israel. At this, they have certainly been successful: while the Biden administration has pursued Saudi-Israeli rapprochement throughout the genocide in Gaza, recent months have seen Saudi Crown Prince Mohammed bin Salman clarify to the Shura Council, and Foreign Minister Faisal bin Farhan to the readers of the Financial Times, that normalization would be conditional on the establishment of an independent Palestinian state.
In recent months, however, a countermovement by the US and Israel seems to sabotage alternatives to normalization by way of a widespread military assault on Iran’s sphere of influence. With Assad’s regime fallen, the diplomatic path taken by a new government—allying with the Gulf powers, or greater confrontation with Israel as it invades Syrian territory—may be an indicator of the strength of the normalization program. Much will depend on the approach of a new Trump administration, which may include the return of the architects of the Abraham Accords to the circles of American power, toward Israel and the region.
In order to understand the particular role of the Gulf states in the Middle East, their relationship to the Palestinian question, and the history of normalization, we spoke to Elham Fakhro, a researcher at the Harvard Kennedy School’s Middle East Initiative and the author of the new book The Abraham Accords.
An interview with Elham Fakhro
Jack gross: Let’s start with the Abraham Accords, signed in September 2020. Who were the players that were involved?
Elham fakhro: Trump’s immediate circle is very pro-Israel. For example, David Friedman, who became his ambassador to Israel, first started out as Trump’s lawyer before he was a presidential candidate. After Trump announced his candidacy, David Friedman pushed to become his advisor and got that role. Friedman shaped Trump’s platform on Israel and Palestine early on. He reversed the Republican Party’s endorsement of a two-state solution and insisted UNRWA was compromised by anti-Semitism. He himself was the head of an organization that fundraised for settlements.
Then of course there’s Jared Kushner, whose family is friends with Prime Minister Netanyahu. (There’s the frequently repeated story about Kushner being expelled from his bedroom as a teenager because Netanyahu was coming to stay.) During the Trump administration, Mike Pompeo became the first acting Secretary of State to visit a settlement. Friedman and Pompeo both speak of this conflict in religious terms. Friedman has openly stated that he believes that Trump was sent by God to save the state of Israel.
Trump was initially advised that bringing Palestinians to the table for peace talks was futile, and then pushed to adopt a series of very pro-Israel policies: moving the embassy to Jerusalem and walking back the 1978 Hansell memorandum, which states the US government position on the illegality of Israeli settlements. If you read Friedman’s biography, it’s very clear that he worked with Netanyahu to influence US policy rather than the other way around. He convinced the president to cut aid to UNRWA, another wishlist item for Netanyahu.
This all led to a boycott from Palestinian leaders, with Palestinian Authority Prime Minister Mohammad Shtayyeh stating that “the rights of the Palestinian people are not for sale.” Afterwards, Kushner still wanted to put together a plan for resolving the occupation, but this was delayed by Netanyahu running for reelection. During the summer of 2019, Trump launched the economic component of a new prosperity and peace plan in Manama. It was significant because the Palestinians weren’t in attendance. Eventually the Trump administration decided to also not invite the Israelis, and instead drew the Gulf states in as intermediaries into this diplomatic process for the first time.
The move represented a new strategy of geopolitical alignment. For example, the economic component of the peace plan was released in Manama, and at the event there was a lot of talk about Iranian extremism being the real threat in the region. It was an opportunity, especially for Bahraini leaders, to express how much they thought in accordance with the Trump administration. The White House also tried to draw the Gulf states in as financial investors in the proposed plan.
jg: What were the steps and issues that led up to this final plan being presented and signed in Washington? What did the plan say on the question of Palestinian statehood?
ef: Shortly after the Manama meeting, Netanyahu and Benny Gantz came to Washington for the launch of the political component of the plan: land swaps for the Palestinians and, in exchange, permission for Israel to effectively annex one third of the West Bank. Palestinians were offered land in Sinai to be linked to other Palestinian territories by a future high speed rail, which would rely on investments, presumably funded by Gulf capital, in exchange for these land swaps. But there was no guarantee of Palestinian statehood.
In lieu of a state, the Palestinians were offered a freeze on settlement construction for a few years, during which time they could decide whether they wanted to continue the talks or not. There was nothing on the right of return. The plan was, of course, rejected by Palestinian leaders. On the day that this rejection was announced, Netanyahu openly declared his intentions to annex the West Bank. This actually caused surprise and frustration among Trump officials who weren’t in support of unilateral annexation.
Trump’s officials were divided between supporters of Friedman who were on board with Netanyahu’s stance, and figures like Kushner who wanted a less extreme version of annexation. Trump was also unhappy—his team wanted to see Netanyahu engaged in the process that they had laid out.
This is when the UAE stepped in. UAE Ambassador Yusuf al Otaiba met with Kushner in DC and wrote an editorial in June 2020, originally published in Hebrew in one of Israel’s main newspapers. He argued on behalf of the UAE that annexation was not acceptable, and that plans for annexation and talks of normalization were contradictory. For the Israeli readership, he dangled the possibility of peace and emphasized commonalities over differences. This was the seed for what would become the Abraham Accords.
During the pandemic, Kushner and his advisor Avi Berkowitz traveled to Israel in an attempt to persuade Netanyahu not to annex the West Bank. It was plausible that Netanyahu’s threats were an electoral ploy directed at extremist settlers and Israel’s most right-wing factions who wanted annexation. The UAE had already indicated to Kushner its willingness to normalize, and this normalization could be offered to Netanyahu in exchange for halting the annexation. This effectively formed the basis for the Abraham Accords announced in August 2020 through Trump’s tweets. A month later, Bahrain’s Minister of Finance called Trump’s people to let them know that Bahrain wanted to join too.
jg: What was the immediate impact of the announcement of the Abraham Accords in 2020?
ef: Initially, the announcements triggered a flurry of petitions across the Gulf states from all kinds of civil society groups criticizing the UAE and Bahrain for their decisions. The response largely took place online, due to the pandemic. Religious scholars condemned it, and civil society groups led the oppositional response—I think we would have seen more protests than we did if it weren’t during the pandemic.
Nonetheless, the new relationship began to take hold and develop.
In the first two years after the agreement, bilateral trade between the UAE and Israel, the two most significant economies involved in the Abraham Accords, reached $2 billion. It’s now projected to reach $4 billion in the first five years, driven by significant investments by UAE sovereign wealth funds in Israeli startups and tech companies, as well as Israeli tourists coming to Dubai. Tourism doesn’t go both ways: In December 2020, about 70,000 Israeli tourists visited Dubai, while roughly 3,000 Emirates visited Israel. The Emirati state and popular media are very interested in pursuing this narrative that normalization is about tolerance and cultural acceptance, which also offers Emiratis the chance to go pray at Al Aqsa Mosque now. Yet there is a reluctance to embrace normalization at the popular level, not to mention a continued commitment to the rights of Palestinians.
On the military side, the US moved Israel from the European zone of command (EUCOM) to the United States Central Command (CENTCOM), which covers the Gulf and Arab states. This was meant to deepen engagement not only between Israel and the normalizing Arab states but also the broader community of Arab states that hadn’t normalized.
There was also significant economic coordination. The diamond industry, a huge source of convergence between Dubai and Israel, has become one of the major areas of trade. There are agreements between universities for enhanced cooperation, think tank agreements, and so on. I think particularly in the first year after the signing of the agreement, there was this huge state drive to involve Israel in everything, in both the UAE and Bahrain.
The Gulf States and Israel in the twentieth century
jg: I wonder if we could place the Abraham Accords into a longer history: How have the Gulf states seen the Palestinian question over the last century? From the Arab Revolt in 1936 and the Partition Plan of 1947 to the creation of Israel and the Nakba, the Six-Day War and the Yom Kippur War—what do those key moments indicate about the development of political power in the Persian Gulf?
ef: Each of these junctures has elicited unambiguous grassroots support across the Arab world for the Palestinians. In 1936, when news of labor strikes and armed revolt against Zionist settlers reached the Gulf through radio and newspapers, efforts to fundraise for them took place in several places, including Bahrain. The Emir of Sharjah, one of the seven emirates of what is today the United Arab Emirates (UAE), himself even donated to the cause. This emerged mostly out of the growing popular sense of Arab nationalism, and solidarity against the British—a colonial enemy intent on dividing the Arab world. Solidarity with the Palestinians in that context made sense.
The announcement of the partition plan in 1947 triggered some unrest in the nascent Gulf states. In Bahrain, workers and high school students went on three days of strike. In 1967, there were similar acts of solidarity, and rulers began to get involved. Sheikh Zayed of Abu Dhabi at the time sent aid to frontline troops in the conflict.There was direct involvement of a Kuwaiti contingent under Egyptian command in 1967—a change from before World War II, when the ruler warned citizens not to send money (presumably because the British, who were in control of Kuwait at the time, didn’t want to see the rise anti-imperialist solidarity across the Arab world).
dylan saba: The Yom Kippur War in 1973 saw the Arab states of OPEC launch dramatic production cuts and sales bans that dramatically impacted the global political economy. How did these events shape the future of the Gulf states’ political unity, and the geopolitical and diplomatic area in which they operated?
ef: The oil production cuts and export embargo that began with that war was one of the most successful examples of coordinated action between the Gulf states. Oil prices quadrupled in two months. High oil prices lasted for many years beyond the embargo, and generated windfall profits for the Gulf states. It also triggered several changes within the United States. The Nixon administration began what would be a decades-long project to diversify energy supplies beyond Middle Eastern oil. It also intensely pursued a diplomatic settlement to the Arab-Israeli conflict. Nixon and Kissinger began to recognize the real connection in the minds of Arab leaders between the peace talks to end the war and the politics of global energy markets.
The first Egyptian-Israeli disengagement agreements in 1974 paved the way for the subsequent Camp David Accords in 1978 and the peace deal between Egypt and Israel in 1979. The upshot to the oil embargo in the US was long-term diplomacy—both political parties realized they needed to do more to resolve the Arab-Israeli conflict. It taught the Gulf States how successful they could be through coordination. Greater political and economic unity arrived soon after with the Gulf Cooperation Council, which the Gulf states formed in response to the outbreak of the Iran-Iraq war in 1980.
jg: How did the Gulf Cooperation Council (GCC) come into existence in these pivotal years? Were there different visions of cooperation among the founders?
ef: The six countries that form the GCC—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—experienced relatively intense vulnerability during the Iran-Iraq War. The UAE did not want to take a side in the war. It publicly staked a nonaligned position and eventually leaders in all of those states agreed that creating formal alliances would be useful for their long-term security concerns. The other event is of course the Iranian revolution of 1979, which had enormous regional implications. For the Gulf nations, it marked the beginning of a deepening security relationship with the United States. These three events—the OPEC embargo of 1973, the Iranian revolution in 1979, and the Iran-Iraq War, particularly the Iranian offensive in 1982—were all decisive for moving the Gulf countries into closer collaboration with one another.
jg: You narrate the period of formation of the GCC during the Iran-Iraq War as the moment that the Gulf States began increasing military spending with new oil revenues and became major defense procurers. How have the Gulf States been shaped by this weapons outlet for their newfound wealth?
ef: The years immediately following the Iranian revolution were a real entry point for US expansion in the region, and Gulf leaders welcomed that expansion with enthusiasm. The rhetoric from Iran was about exporting its revolution. The region was on high alert, especially countries like Saudi Arabia and Bahrain with sizable Shia populations but Sunni rulers. The response among GCC members was to do whatever they could to bring the Americans more closely into the region as a deterrent. As a result, their defense spending grew dramatically. In Bahrain, defense spending became 8.5 percent of its GDP in 1982—two years into the Iranian revolution. The US Navy’s Fifth Fleet moved its headquarters to the country. That’s the moment when they began to see the US as the necessary protector.
From Oslo to the Iran nuclear deal
ds: How did the Gulf States relate to the Oslo Accords? Did they see a potential resolution to the Palestinian question—and thereby the question of normalization—or were they more trepidatious?
ef: At the start of the Oslo process, there was much optimism in the Gulf states that this issue could finally be resolved. Contingent on the idea that the peace talks would end with the creation of a Palestinian state, Oman and Qatar both began to open their doors to Israel by setting up preliminary trade offices in their capitals. Continued normalization of the Omani and Qatari relationship with Israel seemed possible. Both these trade offices were shuttered when a two-state solution did not materialize. In Qatar’s case, this happened partly as a result of both Saudi and Iranian pressure. In 2000, both Saudi Arabia and Iran threatened to withhold their attendance from an Islamic summit being planned in Doha. Qatar shut the trade office, and one year later the Second Intifada broke out.
Through this period, the Gulf states were broadly committed to the idea of “land for peace”—the international legal interpretation of UN Security Council Resolution 242—that had governed all Arab-Israeli peace discussions since 1967. Even during this first wave of post-Oslo dialogue, the broad balance of power in the region meant that normalization was contingent on Palestinian statehood. So when the prospects for that pathway fell apart with the breakdown of the so-called peace negotiations during George W. Bush’s presidency, the Gulf states, in turn, rolled back normalization.
jg: You mark 2006 as the next signal year for two major events that marked Iran’s growing influence in the region and the Gulf States’ fear of that influence. This fear was exacerbated during Obama’s tenure with the US-Iran nuclear deal. What is this next piece in the narrative that leads us to the Abraham Accords project under Trump?
ef: In 2001, Saudi Arabia had launched the Arab Peace Initiative, which was a roadmap for normalization designed on the land-for-peace formula. Endorsed by the Arab League, it also included the condition that Israel withdraw from the occupied territories—at that time including the West Bank and Golan Heights, and also Lebanon—and recognize an established Palestinian state.
Two events in 2006 would begin to bring several of the Gulf states into closer strategic alignment with Israel. First, Iran announced it had enriched uranium for the first time and begun a nuclear program. Second, Hezbollah pushed Israel out of Lebanon. Both of these events signaled to Gulf leaders the rise of Iran, along with its proxies and allies, as a serious force in the region. As in 1979, the region was again confronted with the idea of a rival force that could threaten their standing in the long-term.
This is when we begin to see visible outreach to Israel outside the parameters of the Palestinian question. Normalization of economic relations and progress on Palestine statehood began to decouple. In 2007, the UAE began to procure Israeli technology for a traffic management system and Israeli satellite data to surveil Iran’s nuclear program. Behind the scenes, the Israelis, the US, and officials from several Gulf states—Bahrain, Saudi Arabia, and the UAE—enter into discussion, later revealed by WikiLeaks, about the shared threat emanating from Iran.
From the Gulf perspective, these conversations in the Obama years centered on how to convince the US to take a stronger stance against Iran, invoking greater sanctions and isolation. Israel appeared useful to them in gaining leverage in Washington.
ds: How do you understand the tension or continuity between the Gulf States’ movement against the Iran nuclear deal, Joint Comprehensive Plan of Action (JCPOA), and the Trump administration’s execution of the Abraham Accords?
ef: The Gulf’s relationship to Iran has had two phases: the first, from 2006–2019 was more confrontational; the second, which I believe we’re still in, is characterized by de-escalation, with the overwhelming message being one of building positive ties and avoiding conflict.
Between 2006 and 2019 the Gulf states wanted sanctions, and some even quietly supported direct military action against Iran. They and Netanyahu shared the view of the JCPOA as a deal that paved Iran’s pathway to a bomb instead of hindering it. The Gulf states wanted the JCPOA to target Iranian missile production—a threat, they argued, on par with a nuclear program.
Two events brought a shift in this approach. The first was the tanker attacks that took place off the coast of the UAE in the summer of 2019, targeting four tankers from three different nationalities. The next was the strike on Aramco in Saudi Arabia, for which the Houthi forces claimed responsibility. Both of these events triggered a real change of thinking for Saudi Arabia and the UAE, particularly because they occurred during a Trump administration. With the US not coming to their aid, and Iran indirectly suggesting that the attacks were in retaliation for Trump’s withdrawal from the JCPOA, the Gulf states began to move toward diplomacy with Iran. Following those 2019 attacks, the UAE and Iran hosted multiple diplomatic exchanges. And significantly, Saudi Arabia and Iran restored relations after seven years, in a deal brokered by China. In the last couple of months there have been other visits, very interestingly, between Saudi and Iranian ministers in Doha, which would have been unthinkable a few years ago. So Gulf leaders are putting their efforts towards de-escalation with Iran. They are sending a clear message that they do not want to get caught in the middle.
jg: The Arab Spring was another source of instability for the Gulf powers. Could you talk a little bit about how 2011 impacted these governments, and by extension how they view popular dissent regarding normalization?
ef: Several factors led to this rapprochement between the Gulf states and Israel. The first were the 2006 events that we talked about. The second was the rise of this new generation of Gulf leaders less interested in the Israeli-Palestinian question, and way more focused on the alleged threat from Iran. These leaders tend to be more Western-educated and pro-US, and they don’t really have the commitment to Arab nationalism their fathers used to have.
The third was the Arab Spring, where there was again convergence between Gulf leaders and Netanyahu on diplomatic alliances. At the time, Netanyahu described the Arab Spring as another 1979—another threat to Israel’s security. Meanwhile, the Gulf states were concerned that pro-democracy movements would empower Islamist elements in the region and threaten their long-term survival. Both Netanyahu and Gulf leaders agreed that the Arab Spring was a threat to the regional status quo.
The repression of civil society is effectively part of what makes normalization possible. For example, Bahrain actually had an uprising similar to the bigger mass movements that we saw across other parts of the region and GCC forces mobilized to bring an end to the movement. The agreements with Israel are deeply unpopular. They are only made possible because popular representation is absent. Even pre-normalization, there were polls carried out regularly across the Arab world asking whether the public would support relations with Israel. And in the Gulf, between 85 to 95 percent of the population consistently oppose. Normalization could not have happened except through repression, and this has only continued post October 7.
October 7 and the Abraham Accords today
ds: How has October 7 influenced the question of normalization?
ef: The Gulf States do not want to see escalation between Israel and Iran. They know that they’re caught in the middle, and would suffer at minimum indirect impacts on their economies from further escalation. The genocide in Gaza has put limits on a more aggressive timeline of normalization with Israel—not necessarily because the regimes are moved by the Palestinian deaths, but because popular outrage within their countries has made it clearer than ever that the Abraham Accords and the legitimation they afford Israel are deeply unpopular.
But to me, October 7 and the year since has been the ultimate test of normalization. Even after what Israel has done in Gaza and Lebanon—the extreme civilian toll and suffering, the dramatic destabilization of the region—the goal of normalization has survived among the Gulf states. They haven’t expelled ambassadors or done anything substantive to disrupt their relationships with Israel.
ds: Military technology and intelligence have been a lure for Gulf states, particularly the UAE, to pursue normalization with Israel. But October 7 in many respects represented a failure of both of these supposed assets. Does that factor into the Gulf states’ evaluation of their relationship with the US and Israel, especially given that Iran in some way may view them as partial proxies for the United States?
ef: One of the drivers of normalization is certainly the ability to acquire technology from Israel. While October 7 was a security failure for Israel, that doesn’t diminish how useful the Gulf States see its technology, particularly its antimissile technology.
When the Abraham Accords were first signed, not a single word was said about security or tensions with Iran—it was all about economic cooperation, people-to-people ties, trade, commerce. This is a very striking omission, because these states are now engaged in the kind of second phase diplomacy toward Iran, no longer actively antagonistic. They still want to acquire weapons and intelligence from Israel to protect against future attacks from Iran, but at the same time they don’t want to provoke future attacks from groups close to Iran by engaging in this confrontational military language. If you look at the first year of the Accords, there isn’t much said on technology or military transfers.
This evolves in the second year of the Accords. In January 2022, the UAE was hit by three missile attacks. In response, UAE for the first time publicly requested antimissile tech and anti-drone tech from Israel. Israel gave them technology very similar to what they asked for—the Barak system, which the UAE deployed shortly afterwards. Emirati leaders think Israel, rather than the US, came to their protection. Several days afterwards, Israel sent a team over to the UAE to investigate how the attacks had happened. Bahrain, in contrast to Saudi Arabia and the UAE, very early on made approving statements that the Mossad is present in Bahrain. This, I believe, showcases a slightly different, and somewhat more confrontational approach with Iran.
On the domestic governance front, Israeli spyware, such as Pegasus, helps the Gulf states manage internal dissent. Pre-October 7, there was the sense that Israel had effectively managed a permanent occupation, relying on very advanced technology in order to do so. Some knowledge transfer regarding both the technology and the organizational approach of policing a subject population was valuable to the Gulf states.
The use of spyware has been documented in the UAE against some of its most high-profile dissidents. In the book I mentioned the case of Ahmed Mansour, who was targeted multiple times. While the kind of surveillance software used to track him has confusing origins—its being sold through Cyprus or other places—some of it was certainly Israeli. Bahrain has been less tech savvy on this front. Dissent in Bahrain has been much more visible than in the UAE, and it incorporates a much bigger section of society. During its Arab Spring, Bahrain relied on more typical forms of suppression, like arrests and interrogations. But I wouldn’t be surprised if Bahrain was also acquiring more sophisticated spyware.
ds: You spoke about how the Gulf States, in pushing a particular narrative around normalization, have sidelined the issue of Palestine and portray the Arab-Israeli conflict as something older or in the past that can now be essentially managed rather than negotiated. October 7 was both a reaction to that move and a disruption of that narrative.
ef: This is exactly the rationale behind normalization: The Palestinian question is unsolvable; therefore, not much energy should be expended in trying to resolve it—but at the same time, why let it get in the way of building closer ties with a useful partner? The generational leadership change in the Gulf can be characterized by this sentiment.
This view was shared by US officials in the Trump administration. But October 7 showed that actually the Palestine question cannot be contained. Even if you aren’t really concerned with the occupation, its eruption into a very devastating conflict has implications for regional and economic stability. Take the Houthi attacks in the Red Sea or the occasional missile launched from Yemen—this becomes an immediate issue for Saudi Arabia, which is developing Neom right on the Red Sea. October 7 dispelled the narrative of normalization and showed that you couldn’t just put the issue of Palestinian statehood in a box and forget about it.
Another consequence of October 7, of course, is this real outpouring of Arab support for the Palestinians. It has dispelled the myth behind the Abraham Accords that the Gulf populations don’t really care about the Palestinians anymore and are happy to normalize. For states more vulnerable to civic unrest, like Saudi Arabia, it’s increased the cost of normalization.
ds: It seems that, despite the fact that the war has made normalization much harder to achieve, the Biden administration has tried to resolve the war with normalization itself. Is this a desperate position from the Biden administration? Or is there really the possibility of a deal in which normalization plays a central role, and Gulf states buy into the external administration of Gaza
ef: The approach held by Brett McGurk, Tony Blinken, Jake Sullivan, and so on is exactly that: a grand bargain whereby Saudi Arabia can be brought in and offered normalization and a Palestinian state—or at least some pathway toward a Palestinian state—in exchange for a defense deal. Saudi Arabian officials have clarified several times that they won’t settle for anything less than Palestinian statehood. And what they’re looking for from the US is pretty significant—not just a binding security agreement, but something akin to an Article 5 NATO agreement, whereby if the Saudis are attacked, the US is compelled to respond. In addition to that, they want advanced antimissile tech and access to a civilian nuclear program.
Normalization with Saudi Arabia is far from a done deal, and I think US officials have been overly-optimistic. The US long-term strategy is to delegate its regional policies to an alliance of Sunni Gulf monarchies and Israel. But there are several sticking points to this. The first is whether Congress would ever give Saudi Arabia what it is asking for. Second, there’s the requirement of a Palestinian state, which the current administration in Israel—the most right wing in its history—wouldn’t agree to. No Israeli leader supports this, and the US presidential election, from the point of view of the Arab world, was a contest between bad and worse—carte blanche has already been given to Netanyahu, and there is no reason to expect Trump’s second term will be different from his first.
So the question then becomes, would the Saudis agree to normalization without a Palestinian state? It’s not clear. Some say the Crown Prince clearly doesn’t consider a Palestinian state to be a priority, and any token gesture would suffice. The other view is that it would be too much of a risk to antagonize their domestic population. The Saudis led the Arab Peace Initiative, and they don’t want to lose their clout—let alone alienate millions of Muslims beyond the Gulf who are dedicatedly pro-Palestinian.
Brazil’s low-carbon energy sector is often spotlighted in international forums debating solutions to the global climate emergency. While agribusiness and the extractive industry are the main contributors to the country’s polluting emissions, renewable sources, especially hydroelectric power, prevail in the generation of electricity that supplies public facilities, homes, and industries. But even though the Brazilian electricity sector is widely considered to be “clean,” its history and politics cannot be ignored in a genuinely just project for transitioning away from fossil fuels.
This is due to the way the sector has been privatized in recent decades. The electrification of Brazil does not neatly follow the country’s political history. Following the high-modernist pattern of the twentieth century, demand for electricity grew exponentially with urban population and basic industry during the 1920s and 1930s. This was only possible due to state regulation. The 1934 Water Code was the first major instrument that allowed the Brazilian state to establish the criteria for expanding hydroelectric power. By the mid-1940s, regulatory law ensured that state and national governments held the majority of ownership and control over the generation and distribution of hydroelectric power. The development projects of Getúlio Vargas (1951–54) and Juscelino Kubitschek (1956–1961) included a series of public investments in infrastructure that significantly expanded the country’s electric capacity. These culminated in the 1962 establishment, under João Goulart (1961–64), of a state-owned electric company, Electrobras, designed to coordinate, oversee, and execute projects related to hydroelectric production.
This trend toward public ownership and planning was not discontinued under the 1964 military coup. What changed with the Brazilian dictatorship, however, was the nature of investment. Dependence on international private capital for productive expansion significantly increased. During the dictatorship, sixty-one large dams were built. Hydroelectric generation was crucial to the so-called “economic miracle” of the authoritarian regime: during the 1973 oil crisis, 90 percent of the electricity generated in Brazil came from hydroelectric sources. However, the deterioration of the international economic environment during the 1980s exposed the fragility of the miracle: the exponential growth bequeathed by the dictatorship was actually one of social inequality and foreign debt.
Retracing the history of Brazil’s clean electricity sources is essential to understand the terms of the country’s climate transition. The construction of power plants, especially during the military dictatorship, entailed social and environmental damage as significant as the structural advances achieved. In the regions where they were built, the dams displaced thousands of people, flooded entire towns, and eliminated biodiversity in ecosystems. Public investment in infrastructure guaranteed Brazil’s energy sovereignty. But the military’s political repression concealed the increase in international dependence, and developmental constraints, this entailed. The widespread lack of social and environmental compensation that marked the years of expansion of the country’s system hydroelectric generation exposed the flaws of an unjust economic development model.
Redemocratization promoted a perverse shift away from the continuous energy developmentalism of the Vargas era, the Fourth Republic, and the military dictatorship. While the Movement of People Affected by Dams (MAB)—an organization aimed at defending the interests of the populations affected by the generation, distribution and sale of electricity—emerged among the social movements of the 1980s, from the 1990s onwards the electricity sector was largely privatized. Since then, the electric grid has been characterized by private control, with a strong presence of interest-bearing capital, company indebtedness, and the internationalization of prices and rates. Privatization, however, did not end the exploitation and violation of the rights of populations affected by the hydroelectric system. The climate crisis, in light of this history,has brought new urgency to the claims of environmental justice made for years by organized sectors of Brazilian society. Hugo Fanton, editor of Phenomenal World, spoke to Gilberto Cervinski, leader of the MAB—a movement that has recently begun to include families affected by mining following the construction of dams and climate change-related events, such as the floods that hit southern Brazil this year.
Cervinski holds a master’s degree in Energy from the Federal University of ABC (UFABC) and is a collaborating professor on the Energy and Society in Contemporary Capitalism graduate program at the Urban and Regional Research and Planning Institute of the Federal University of Rio de Janeiro (IPPUR/UFRJ).
An interview with Gilberto Cervinski
hugo fanton: How is the electricity sector in Brazil organized and why does the energy transition issue depend on its transformation?
GILBERTO CERVINSKI: The electricity sector in Brazil, which represents one part of the energy issue, was traditionally structured by the state and public companies—such as Eletrobras and state companies—that built the power plants, transmission lines, and organized the process of distributing electricity to the cities. This model lasted until the 1990s, when a process to privatize the sector began. The most efficient and largest load-bearing power plants and transmission lines in this industrial complex were privatized. As a result, wholesale rates and final prices for the population increased. Now we have a privatized electricity sector. Those who control the power plants, transmission lines, and distributors are the big banks and speculative investment funds: nowadays, the owner of all the power plants is interest-bearing capital, which we call parasitic capital. A related feature of the current model is the composition of energy prices: we currently have one of the lowest energy production costs and one of the highest prices in the world for the population. It’s a great contradiction. This is the model that has been in place since the 1990s.
When we at MAB talk about the need to create a popular energy project, we are saying that Brazil must fundamentally change the pricing policy, recover sovereignty, and guarantee rights and adequate reparations for the people affected by the construction of the grid. This cannot be reduced to hydroelectric plants. The fight for a popular political project organized around energy is therefore a movement for changing the nation’s energy policy on all these bases, from the dams themselves to the larger question of environmental policy. This year we are experiencing the longest drought in the history of the Amazon, which is being burned to the ground. And why is that? Because major landowners are setting fires to raise cattle. These are the issues that must be fundamentally changed.
hF: Why are retail energy prices so distorted from generation and distribution costs?
GC: With privatization, rates were reformulated based on international energy prices—which are determined by the costs of coal-based thermal energy. But here energy is produced by hydroelectric plants. We have river basins with twenty plants, one right below the other. The same water produces electricity twenty times over the course of a basin—this water is renewed at no cost. But these very low costs do not translate into benefits for the people. On the contrary, it is a mechanism for accumulating wealth based on the difference between low production costs and high tariffs. This is because the regulatory agencies that oversee energy policy are captured by private finance, by the banks. In addition, there are violations of the rights of both workers in the sector and the populations affected by the projects. Power plants are built and the people affected are expelled from their territories without compensation or reparations.
More than 80 percent of the electricity produced in Brazil comes from renewable sources, mostly hydroelectric, which accounts for 70 percent of actual electricity production. The remaining 10 percent comes from wind and solar sources. There is no cost for water like there is for coal, oil, and natural gas. In Europe, for example, producers need to buy fuel and burn it in a thermoelectric plant to produce electricity. Here in Brazil, we have many large self-replenishing lakes. It’s the lowest production cost when compared to other renewable sources or to thermoelectric or nuclear energy. But since the sector has been privatized, the price is not based on the cost of the hydroelectric plant. The international price is adopted. And the price that prevails in the world is based on what the world produces, coal-based thermoelectric power, which is precisely what costs the most. That is the reference for what they call the “ceiling price” of energy. Here, the ceiling price is adopted, the highest in the world, with the lowest production cost, so the profitability rate is extremely high.
hF: Who benefits from the present model?
GC: The banks and financial funds made a huge move during the Cardoso administration to control the Brazilian electricity sector and extract extraordinary profits. There has been a strategy of indebting the energy companies—today, they are over-indebted, paying extremely high interest rates. This cost is dumped on the consumer’s electricity bill. So there are two mechanisms that guarantee extremely high profit rates: the companies’ indebtedness and the electricity bill itself. It is parasitic capital that extracts income from all workers in Brazil. Energy prices and rates are central to the control and distribution of national wealth: they work as mechanisms for extracting income from the masses through the payment of electricity bills. In Brazil, there are 80 million residential consumer units: families that pay electricity bills. If we adopted a real price policy, consistent with the Brazilian system of low-cost generation, people would pay a lot less. There wouldn’t be this extraction of wealth from their hands. With an energy policy that guarantees high prices, a portion of workers’ wages is expropriated and concentrated in the hands of the banks and financial funds that control the sector.
hF: In 2012, Dilma Rousseff issued Provisional Measure 579 to change the way prices were set in the energy sector. Can you explain the context in which this happened and why the initiative failed?
GC: Brazil’s large hydroelectric plants were built in the 1970s. The government concession contracts for 60 percent of them were due to expire around 2012. The thirty-year concession paid off the debt incurred in building the plants: as of that year, these plants would no longer have any remaining debts from the initial investment. The proposal was to offer the country energy under new terms: at cost plus an average profit rate. This was Dilma’s policy: offer the country energy at the real cost of production, since the Brazilian people had already paid for hydroelectric plants over thirty years of concessions.
This created a political problem. Under the proposal, generation plants would no longer carry interest costs, which triggered a strong reaction from Brazilian bankers. The Rousseff administration was calling into question two components of the extractive model: the price of electricity bills and the payment of interest on companies’ debts. The president picked a huge fight with financial capital over this. No wonder financial capital was one of the leading sectors favoring the impeachment process. The result was the coup of 2016.
What happened after the coup? Instead of Dilma Rousseff’s proposal of reducing electric company debts and retail prices, the companies incurred new debts—as if the old hydroelectric plants were being built again.1 Each of them now has a new debt and is paying interest on it, once again paying for the investment in their production. And who owns the debts? Private finance.
hF: The privatization of Eletrobras was also part of this backlash from financial capital. What were its implications?
GC: After the 2016 coup, there was a move to privatize Brazil’s last major state-owned company, Eletrobras, which owns forty-eight hydroelectric plants in the country—the ones with the highest quality from a financial perspective, with debts that have been amortized. Capital didn’t want to pay what these hydroelectric plants were worth. So the privatization was carried out by the Temer administration transferring control of the company for a price far below what it would cost to sell the hydroelectric plants. This privatization was outrageous. Currently, the government controls only 10 percent of Eletrobras. Everything else is in the hands of finance capital. It was a process of plundering national wealth: 48 hydroelectric plants transferred overnight to the control of private capital, unnecessarily. And we can already see the consequences: further price increases and higher electricity bills.
hF: What would a change in the energy system to address the climate crisis mean in a country with such characteristics?
GC: The environmental debate has been going on around the world since at least the 1970s. Eco 92—the United Nations Conference on Environment and Development of 1992, or “Earth Summit,” which took place in Rio de Janeiro—was also an important milestone. Yet throughout this period there has been a linear increase in fossil fuel usage—oil, coal, and gas consumption— and a parallel upward trajectory of greenhouse gas emissions.
It’s not only fossil fuels that cause gas emissions: here in Brazil the main cause is agricultural activity. They call it agribusiness, we call it the agrarian bourgeoisie. They produce and want to expand areas for soy, beef, cellulose, and sugar cane. In order to do so they want to deforest both the Amazon and the Cerrado, areas of the country that still have standing forests. This is a second front, therefore, of the climate transition. In the case of Brazil, we must combine changing the energy matrix with curbing the agrarian bourgeoisie’s drive to destroy forests. We need to contain deforestation, which implies a profound change in agricultural production. And when we talk about changing the energy matrix, it’s not about changing the source of electricity, but about energy policy. That’s what needs to change: the pricing policy and the control of generation, as well as the fuel sources.
hF: Specifically regarding electricity production, what would be the necessary changes?
GC: Brazil perhaps has the best conditions in the world for generating renewable energy, with 230,000 horsepower installed in power stations built over the last hundred years. And it has the same amount of potential for offshore wind energy production. We also have regions of extremely high solar radiation, equivalent to deserts, as well as biomass and hydroelectric potential. In other words, Brazil has one of the best production conditions in the world. It has great hydroelectric potential.
Despite having several options, big businessmen in the energy sector want to resume the construction of huge hydroelectric dams with large lakes in the Amazon. This means flooding thousands of hectares of forest. Why is this so interesting? The answer lies in energy policy, for what and for whom this electricity is destined, and in a speculative logic of the industry’s new owners. Now they’re proposing to privatize the forests here. And what is forest privatization? It’s handing over the exploitation of forests to big farmers and banks. It’s not preservation. It’s increasing private ownership of reserve areas. The initiatives to monetize and commodify the climate prevent a real solution. Who benefits from carbon credits here? It’s precisely the farmers and power plant controllers. In other words, it’s a financial mechanism that, under the guise of protecting nature and reversing climate change, benefits exactly those who are actually causing the problem.
This is what we need to tackle. Even though renewable energy is available, the Brazilian people are punished. We have to change national energy policy, pricing policy, and control over production and distribution. The environmental problem is serious, but the solution presented by financial capital is financialization and privatization. What we have been doing is exposing the fact that the privatization and commodification of the environment will not reverse the climate problem. Quite the opposite
hF: How does MAB operate in this scenario?
GC: MAB has a history linked to the impacts of hydroelectric dams, going back many decades. The movement comprises people who have been forced out by the construction of hydroelectric plants, without compensation or reparations, in various corners of Brazil. Over time we have become a national organization. The name is Movimento dos Atingidos por Barragens (Movement of People Affected by Dams), but there has been a change in recent years, because it’s not just those affected by hydroelectric power plants, but also those affected by two new situations that are very similar. The first is the collapse of tailings dams—dams created by mining waste—in Mariana and Brumadinho, in the state of Minas Gerais. There are several others that have broken in different parts of Brazil. These affected people are also organized in MAB.
We have come to also include, over the past few years, those affected by climate change, such as the people impacted by the rains on the coast of São Paulo and, now, the more emblematic case of the major floods that swamped Porto Alegre and other cities in Rio Grande do Sul. Our struggle is both for the rights to compensation and reparation of those affected, and for a popular energy project to transform the prevailing business model of electricity generation. Our history is intertwined with the energy issue, which is why we analyze the sector, publicly discuss these aspects, and fight to transform national energy policy.
hF: What is the current situation of those affected by dam collapses in Mariana and Brumadinho?
GC: Over nine years have passed since the dam collapse in Mariana. To date, families have not been compensated. The dam broke in the state of Minas Gerais, near Belo Horizonte. The toxic mud fell into a watershed formed by the Doce River, which runs for 670 kilometers to the coast of Espírito Santo. The entire river was destroyed by the mud, which then invaded the ocean and reached Abrolhos, in Bahia. We are currently organizing people throughout this region. Due to making greater demands and the Lula administration’s sensible approach, there is now a major compensation agreement for the families being discussed with the companies. Just to give you an idea, 700,000 people are suing the companies in London, because the Brazilian courts have, in a way, sided with the owners of the companies. The families have filed a lawsuit abroad to seek redress, and this is helping to speed up the settlement now.
As for Brumadinho, the mud reached another river basin, the São Francisco. Thousands of people were affected. An agreement was reached recently, but the families still haven’t received their compensation, so the fight now is for the agreement to be fulfilled and for the basin to be rehabilitated. And these people are organized within the movement, fighting for their rights. There are several fronts of action, because the problem has affected people, communities, the river itself, the flora, and even the sea. It’s a very complex process, and MAB is prioritizing the issue of those affected.
hF: And what’s the situation in Rio Grande do Sul?
GC: There are six basins in the Porto Alegre metropolitan area. They all flow down towards the capital of Rio Grande do Sul. In May 2024, it rained 900 millimeters in five days. The average in the region is 170 millimeters a month. All this water overflowed the river, which rose from 13 to 33 meters deep. The water carried everything away, bringing down houses and entire neighborhoods. More than 200 people drowned because the water rose so quickly. In all, more than 2 million people were affected in the state. Porto Alegre had a wall protection system to prevent flooding, because it is a city on a level with the Guaíba River. The municipality is responsible for maintaining this system, but in recent years, fascist and neoliberal mayors have neglected the system’s maintenance and it hasn’t worked when needed. Porto Alegre and the metropolitan region were flooded for 21 days because of this. People lost everything they had, their homes, their furniture, everything. So, in some places, the fight is about rebuilding homes and getting families back to where they used to live. We are organizing all these families. People have identified with the movement: we’ve brought together those who have lost their homes to flooding, mudslides, or dam construction. These families have legitimate claims and, of course, that places pressure on government at the center of our campaign.
As the nation prepares for a second Trump administration, the mood among many Democratic Party officials has been one of bafflement and astonishment. How could voters have failed to rise to the defense of the democracy and “institutions” that Democrats spent eight years lionizing as bulwarks against an incipient Republican Party fascism?
Among the electorate, however, disappointment is just as likely to be at the choices on offer as at the outcome itself. The Pew Research Center in exit polling found 64 percent of respondents thought the campaign “was not focused on important policy debates.” In pre-election polling, it found 63 percent of Trump supporters and 62 percent of Harris supporters sharing such sentiments.1 Given how diminished the scope for change appeared to most voters, it is perhaps unsurprising that turnout fell by 2.6 million voters below the level of 2020—while the voting-eligible population increased by 3.5 million—with those staying home concentrated among large cities in swing states: traditionally Democratic-voting precincts.
What explains the American party system’s continued rightward drift? On this question few analysts have offered insights as trenchant and consistently significant as Thomas Ferguson, currently Director of Research at the Institute for New Economic Thinking. For the past four decades, he has argued that American politics is best explained by an “investment theory of politics.” According to that theory, electoral outcomes are shaped by competition between the parties not over the preferences of voters—as argued by the “median voter theorem” popularized by postwar social science—but rather by a different set of preferences altogether: that of donors.
Countless surveys show that voters preoccupied with life and work are uninformed when it comes to the finer points of foreign trade; the federal budget; or the determinants of investment, unemployment, and inflation. If they must select among candidates and platforms decided elsewhere, how are those choices defined? To either the chagrin or inspiration of many historians, economists, and political scientists, Ferguson has spent decades in campaign-finance records and the historical archives of key twentieth century business and party leaders.2 The evidence he’s found demonstrates that the complex of business corporations and their financiers—whose growth plans would be made or broken by changes to tax law, regulation, foreign policy, and exchange rates—significantly shape candidate nominations, electoral campaigns, and the careers of politicians. In a money-driven campaign and media system, these are the contributions that matter most.
Despite the revelatory nature of his archival findings to the theory of how electoral realignments happen, Ferguson’s prescient warnings of the deep decay of American party politics appeared to go unheaded by partisans ostensibly alarmed by the state of American democracy. As readers search for answers about how to interpret the 2024 US elections, Phenomenal World editors Tim Barker and Andrew Elrod reached out to Ferguson for a conversation about his thoughts on the recent campaigns. It has been edited for length and clarity.3
An interview with Thomas Ferguson
Andrew elrod: One thing that struck me about the 2024 election, and really about Democratic strategy since the 2022 midterms, was the degree to which the party seemed to be engineering a demobilizing operation.
Thomas ferguson: Let’s put it in very simple English. Joe Biden was the consensus candidate of the Democratic Party establishment in 2020 because he was the only one who was broadly acceptable within the Party, looked viable against Trump, and could hold off Sanders. His candidacy was strongly reminiscent of Paul von Hindenburg’s second run for president in the last days of the Weimar Republic, when everyone from liberal elements of big business to the Social Democrats united around the doddering octogenarian as the only candidate capable of defeating Hitler.
I like to start the discussion of recent American politics with the 2014 midterm elections, which I analyzed in a piece with Walter Dean Burnham. The big story in 2014 was the stupendous decline in voting turnout compared to the presidential election in 2012. The turnout drop off was the second largest ever in percentage terms. Only the 1942 decline was greater, because millions of voters were shipping out across the globe to serve in World War II. But in many states turnout in 2014 collapsed to astonishingly low levels, akin to those of the Federalist era (when property suffrage laws limited voting). Regional differences in turnout between the North and the South also pretty much closed up for the first time since perhaps 1872, when much of the former Confederacy was still under occupation by Union armies. But this wasn’t because Southern turnout arced upward. Of course voter turnout in the South had been slowly rising since the civil rights revolution of the 1960s, but what finally brought the regions to parity in 2014 was plunging northern and western turnout. California probably witnessed the lowest rates of voting since it came into the Republic, while Nevada, Utah, and other states hit true lows. Burnham and I concluded that this signaled voters were sick of the establishments of both parties—that real upheaval impended.
What we got were challenges from outside the normal political spectrum. Trump challenged from the right, Sanders from the left. The dramatic entrance of candidates who did not stand for business as usual started a process in which turnouts rose sharply with these outsiders pulling in lots of people on both sides.
In 2016, Hillary Clinton and the Democratic Party leadership would not deal with Sanders. They famously cut the Sanders movement out of everything. In 2020, with Trump in the White House, Sanders ran again and lost, but he did quite well and the rest of the party consolidated around Biden. Sanders was undeniably a major force in the party and his movement could not be ignored. Elizabeth Warren represented a somewhat similar force.
In contrast to 2016, Biden let Sanders and his movement into the campaign and then into a kind of power-sharing arrangement. Underneath all the discussion of investment approaches to politics that I’ve done is a basic model of American electoral politics in which elite conflict driven by industrial structure interacts with broader social conflicts. What was happening after 2014 was the political expression of people who were definitely not super rich in any way, shape, or form. You can see that very graphically in the paper that Paul Jorgensen, Jie Chen, and I did, where we show the percentages of cash coming from various size levels of contributors. There’s basically one guy who’s not getting any money from the super rich: Sanders. All the other candidates are. Trump has that peculiar barbell shape: he gets a lot of small money, but he gets enormous amounts of big money, too.
Biden thus came to power in 2021 in coalition with a serious, articulate progressive agenda. The bulk of the Democratic party didn’t like that: Pelosi and, for that matter, most of the Biden people were not wild about the Green New Deal.
But Democrats knew they had made a big mistake in 2009, when they came in and did the small stimulus. Everybody agreed they could not repeat that disaster. Even the financial community took the point—emblematic of this is a January 2021 paper by Robert Rubin, Peter Orszag, and Joseph Stiglitz. Basically, it says you need to go big on fiscal policy. But the understanding of the financial wing of the party was that this would be a temporary stimulus. I’m not saying this worked out because three guys agreed. The agreement reflected a current of thinking that was very strong—Rubin’s signature in particular is representative of that. The guiding idea was “let’s go big early and then taper it back.”
The result was a consensus to try to put a big package through. And that happened: the American Rescue Plan, which the Wall Street Journaljust the other week was denouncing quite mistakenly as the cause of inflation. At that point, Biden’s popularity was very high. But the program was rapidly cut back. To caricature this for clarity: for about two years, you had almost a European social welfare state briefly in the United States. You got all kinds of things that you should have—the stimulus allowed people to pay for doctor visits, cover essentials, and there was meaningful childcare assistance—and then suddenly you didn’t again. Nearly all of that was rolled back before the 2022 election. Not quite all of it, but most of it. And the administration pretty much gave up on Covid-19 and declared victory prematurely, as Phillip Alvelda, who led the DARPA project that helped develop the mRNA vaccine, has spelled out in damning detail.
Ae: Let’s talk about the Inflation Reduction Act—the culmination of these struggles in Washington that opened with the American Rescue Plan and intensified as inflation accelerated.
Tf: The killer problem for the climate politics part of the Biden agenda, in my opinion, occurred after the war had started in the Ukraine. The Russian invasion drove oil and liquefied natural gas prices to the moon. Suddenly liquefied natural gas (LNG) exports from the US looked really crucial to supplying the rest of the world. Large fossil fuel interests saw their opportunity and went on the offensive. You could see this as it was happening. The new view in the US foreign policy establishment was, “you know what? Domestic fossil fuel production is a great weapon in foreign policy. We can supply Europe with the energy they’re losing as we finance the war with Russia; in fact we can supply many parts of the world. Let’s not push out the natural gas or oil guys too fast.” And the Biden administration discovered you can garner campaign contributions from those folks. As we know, US drilling increased, not decreased under Biden.
Ae: You’re arguing that the rescue of the various green energy tax credits from the whole Build Back Better agenda in the spring of 2022—the green capital push—was also a way to give fossil fuel producers a stake in the Bidenomics coalition?
Tf: That’s exactly what happened, though the Democrats were never going to be as hospitable to oil and gas as the GOP, since they also represent the possibility of action on climate change. The key point is that oil and LNG forces were no longer being treated as pariahs anymore, but as a potentially important international economic resource for the United States, a view that was shared widely within big businesses and the foreign policy establishment. I’m only repeating judgements that are obvious in, for example, Jamie Dimon’s “Letter to Shareholders” in the J.P. Morgan Chase annual report.
Ae: How does the problem of inflation enter the political calculus here?
Tf: The inflation was principally a supply-side story. Covid-19 happens. You can’t get anything or go anywhere. There’s nobody able to work in many places. You’ve got hundreds of ships sitting off ports that can’t land. Almost everything grinds to a halt. It has nothing whatsoever to do with any government spending. When Servaas Storm and I worked through the spending statistics very carefully in the first of three papers we wrote on this, we showed that, in fact, the federal spending had trickled off to almost nothing by October 2021, while inflation went higher and higher, surging principally in response to the Ukraine war, but also to problems related to climate: droughts, wildfires, and intense storms hitting crop patterns and infrastructure. These interact with oil prices which also drive up food prices. That last point is shown beautifully in a separate paper by Carlotta Bremen and Servaas Storm.
In my opinion, the Biden people should have moved to quickly choke off general financial speculation in commodities. Not everyone agrees with me, but I think they could have done it. A former Commodities Future Trading Commissioner actually told me he thinks US regulators probably could have acted, though we agreed that coordination with the Europeans would have been much better. The administration could have at least made the point and asked Congress for the authority to do something.
If the authorities had gone back to the older, pre-deregulation rules where end users and producers of the product were the folks mostly allowed into these markets, you would have contained those big price spikes, and the stabilization would have spilled over onto food prices.
Ae: Can you say more about how the regulation of commodity futures contributed to inflation?
Tf: In the old, pre-deregulation days, you couldn’t get into those markets on the financial side, except with very severe limits. You had to be somebody who actually used the commodities in their products, or you had to be a primary producer trying to hedge. The Bush-era regulatory changes made a huge difference. You may remember when AIG went bust in September 2008 and Tim Geithner, Hank Paulson, and Ben Bernanke got the federal government to rescue it. The team administering AIG had to get rid of a huge pile of commodities. They sold it all off one afternoon. It was shocking. AIG had all kinds of things in there: crops, metals, you name it. World commodities took a hit. But what that showed is how much financial firms just go in and speculate in this stuff. This is a US, a European, and, indeed, a world problem.
But Biden’s top economic policymakers, in the National Economic Council and elsewhere, drew heavily from hedge funds, private equity, and other financial types—despite talk about all the labor people in the administration. They should have done something. They should also have moved much more vigorously on antitrust. This is partly the responsibility of the FTC, where Lina Khan was certainly willing, but she was just getting into the job and met with huge internal resistance. They could have put a lot more emphasis on antitrust earlier. They didn’t. The antitrust section of the Justice Department could also have moved much faster than it did. Now, the Biden antitrust record overall is pretty good, but they were slow when it really mattered, at the start of the inflation, with the reopening of the freight system. They should have jumped in with something like a World War II-type coordination system—to open those ports much faster.
Tim barker: Why was it that Biden was so relatively good on antitrust? How do we explain Lina Kahn?
Tf: That pick reflected, first of all, the Warren and Sanders wings of the party. That was the appointment that signaled to everybody instantly that they were going to be serious about this. There is also, though, a strong minority view even in Silicon Valley itself that the smaller startups are bled by the platform companies. You can see that today in the Vance wing of the Republican Party.
But unfortunately, the Biden people dragged their feet. They should have controlled “greedflation” and paid more attention earlier to algorithmic pricing. It’s crazy to me how many economists even from the left kept denying “greedflation.” It’s clear in the data.
The administration’s slow response to inflation turned into an ostrich policy. In 2024, this was politically disastrous. They just kept proclaiming themselves as the most labor friendly administration. Sometimes they said in history or sometimes since FDR. There were all these folks, David Autor, Paul Krugman, and Arindrajit Dube saying that real wages were rising. Servaas Storm and I have written three very detailed papers on this, and we have walked through the evidence, and we conclude that no, in general, wages were not rising. The very lowest wages rose a tiny amount, pretty plainly a response to much greater workplace hazards, and everybody else’s wages lagged behind inflation.
Even within the wage data, there’s something of an optical illusion: Hourly wages rise, but working hours are dropping a lot. Average weekly real earnings are falling. No matter how you do it, most people are not keeping pace. As of our most recent paper, the overall loss is about 3 percent. Now the numbers in real wages were getting better over the course of 2024, and so that number might change slightly, though not by much. The fact is as we said, inflation’s decline without a recession came mainly from restored supply chains, some delayed expansion on the supply side, and a loss of widely distributed purchasing power—a fall in American real wages.
What was happening to people’s wages and incomes would have been much clearer if analysts would have stopped confusing people with statistics about hourly wages and simply focused on household median real income, where the numbers have been obviously disastrous if very slow in coming.
Almost everybody knew this, intuitively, when they went into a food store to buy anything at all. For the Democrats to keep parroting their “we’re the most pro-worker administration ever” line in 2024 was suicidal, even if their appointments to the National Labor Relations Board were truly labor friendly and had key impacts on specific campaigns. All the numbers for 2024 are not yet in, but the net change in the percentage of the workforce unionized during the entire Biden presidency is going to be either zero or very close to that.
In the election debates, it did not help that Democratic economists kept ignoring the actual record of the first Trump administration. Trump sharply criticized the Fed for prematurely hiking interest rates. Wages barely rose during his first term—leading to increasing doubts about the Phillips curve—but working hours went way up. Accordingly, the median household income figures rose a lot. Democratic economists were not wrong to note that the tax code and deregulation measures tilted heavily in favor of the rich, but many just ignored the short-run income rises that benefitted everyone, including minority groups, substantially. The number of pages in the media over the last two years pushing weird theories about why people didn’t appreciate that they’d never had it so good was a vast diversion.
Tb: Some people recognized the “greedflation” problem. Lael Brainard was one of the most outspoken about this, and the administration even tried to do a little jawboning.
Tf: When Brainard was still on the Fed board, she was often the most reasonable person in the published meeting minutes. Voters had a much better understanding of these issues than the media discussion. The truth is that while you have many Democrats saying people are stupid, it was the elites that were stupid. It’s really a case of that saying: You can fool all the people some of the time, and some of the people all of the time, but you can’t fool all the people all of the time. The Democratic campaign found that out. Telling everyone that American democracy itself will end if you don’t vote them back into power after you’ve steadily lost purchasing power on their watch was just not going to cut it.
ae: Was there any contingency at all in 2024? Some argue that no matter what campaign the Democrats ran, they would have lost. The outcome was overdetermined—not because of the administration’s conservatism, but because inflation was global and so was the anti-incumbent wave of elections.
Others say that the Harris-Walz people actively ran a conservative campaign that failed to differentiate from the incumbent, and repudiated key parts of their base, very openly, intransigently, and as a result they were punished at the polls. Do you side with one or the other of those explanations?
tf: People knew their real earnings were declining. That was, in my opinion, fatal in the absence of a more dramatic break with Biden. The inflation situation defined the “Macroeconomics of the Second Coming” of Trump. What was crazy is the resistance in the media, the New York Times, the Washington Post, and elsewhere to this rather obvious point. I spoke with various economics writers in some of those publications, who had some idea of what was happening, but they were afraid to touch it. People talk about the fragmented media context—what we really have is media balkanization with overarching partisan divisions, and almost everybody, including bloggers, takes their cues either from some party or party-related apparatus. Critical assessments of the wage data just did not get published. Ditto for the closely related issue that we kept documenting: that wealth effects from the Fed’s quantitative easing were also a major factor in driving inflation on, too. Only now are the Fed and the IMF publishing studies that recognize this.
But Harris and Walz did not break with Biden, not even respectfully, not even implicitly. Instead, they told everyone to be joyful. They were extrapolating from the outpouring of joy when Biden finally pulled out, which was real, but then they failed to articulate anything different, except an empty emphasis on “opportunity.” Let’s forget the campaign’s ridiculous appeal to crypto as an opportunity for black males—the whole package was fairly vacuous and it went over like a lead balloon with real people almost regardless of race or ethnicity.
I do think there were ways the Democrats could have won the election. Their situation was rather like Truman’s in 1948, when he had presided over high inflation and was down in the polls. He solved that problem with an assist from a major oil company that came up with money for the famous “whistle stop” train campaign that took him around the country to meet with Americans. Now, he didn’t repudiate himself—he ran against the “do nothing” Republicans in Congress and narrowly won. Biden’s Hindenburg strategy, of course, made that kind of strategy difficult, since it was premised on pulling in as much of big business as possible against Trump and attracting as many big donors as possible—including Republicans. Harris and Walz persisted in that path, and even more aggressively courted elusive moderate Republicans, but they could have drawn much clearer lines on Social Security, which they barely mentioned, medical care and public health, or even—imagine this—strongly defended Lina Khan and her impact on Americans instead of parading around with her critics. The campaign could have simply said it would fix the problems already identified in Congressional hearings with health care companies denying medical coverage to policyholders. People are desperate and very angry, as the murder case in Manhattan illustrates, but healthcare all but vanished from the front-page political agenda since the epoch-defining pandemic.
Instead, they talked up ideas for controlling “greedflation” in grocery prices—one sector from which they knew they could hardly hope to attract campaign contributions. I’m convinced most voters saw right through the thin proposed remedies—if they were even aware of them—but we can wait for serious post-election survey data to make sure. The campaign’s concentration on Republicans and donors who mostly wanted nothing to do with such subjects is obvious.
Political science struggles to account for the overwhelming influence of big donors on our elections. In 2016, the mainstream social scientific consensus ascribed Trump’s victory to racism and sexism, brushing aside very sharp evidence that voters did not see significant differences between the parties on other issues, and in particular the economy. Or they told us fables about how “professionals” ran the party—a theme that has reemerged this month in claims of a supposed NGO “groups”-driven leftward drift in the party—instead of major donors.
tb: In that connection, I have to ask about crypto, which is by some accounts the largest corporate sector intervening in this election, and one that seems to have a big influence operation in the media.
tf: My colleagues and I are writing a piece on crypto. When we started, we were focusing on its inroads in the Democratic Party because only one Republican in the House voted against a major piece of proposed legislation to regulate the sector. There’s no variation on that side, which gives little space to model anything, so we were very interested in which Democrats were and were not voting against the industry. But crypto is probably not the biggest sector in campaign contributions. Oil, gas, finance, and technology—the high-tech firms, too—are the much bigger story. The big numbers you see rest on amalgamating all of tech with crypto.
There are serious problems with existing coverage of political money. My colleagues and I “roll our own” data, as it were, pulling it straight in from the Federal Election Commission (FEC) ourselves and sometimes the IRS. What we find in our accounting usually differs from what journalists and many scholars claim, sometimes dramatically. In the piece we wrote on Sam Bankman-Fried and FTX, for example, we immediately found tens of millions of dollars more than other journalists were reporting at the time.
Yes, the crypto people are big. But I doubt very much that their campaign spending is unique. The real story you want to concentrate on with crypto, I think, is financial stability and transparency. Financial stability and “know your customer” rules are actually organically connected; when you don’t know what claimed assets really represent and you can’t ascertain that, you are asking for trouble. Comparisons of the huge rise in crypto recently with Tulip Mania are a bit unfair; the flowers at least had real decorative uses. No heavy hand of any government caused the crypto collapse during Covid. It is intrinsic to the phenomenon. Tech fixes that are supposed to guarantee stability in stablecoins failed; those things stay stable to the extent they have an outside guarantor. The big question is how much the banking system will become an appendage of crypto.
A lot of political money data is also still unexplored. There are vast inflows into state political machines that are not in the FEC, and can only be found in the IRS numbers. Meanwhile, the IRS has been retiring many of the reports and been very slow publishing recent ones, so it’s mostly terra incognita in need of serious research. And news outlets—the New York Times, Bloomberg, and other folks—pour lots of money into polling, but devote little attention to analyzing political contributions, beyond making lists of billionaires.
The sad fact is that even right after the reforms that came out of the 2008 financial crisis, Congress had real trouble standing up to finance interests. We know now that US Congressional elections are linear functions of money and careful tests show that that is not principally because money is following votes, but rather the reverse. You can actually watch gambling odds on the new prediction markets change as money pours in sometimes. It does not help that the leaders of neither political party want to regulate political money or their own stock transactions in any serious fashion. Or that so many of them, their aides, and their children and spouses shamelessly turn into lobbyists at the first opportunity.
ae: What does the evolving industrial structure and the investment theory of parties explain about the current political landscape? As a theory of historical explanation, your work has shown how business polarization in moments of changing industrial structure has in the past led to moments of realignment. Yet over the past four decades or so, there seems to have been a prolonged decay and failure of realignment to occur. What kind of period are we living through? Where is the industrial structure headed? Is business polarized? Why is a realignment failing every four years?
tf: I’m cautious about this, especially now because my colleagues and I are still doing the data for 2024 and I’m a believer that if you don’t have access to archival data, you can study public statements, but they’re imperfect evidence.
In the old paper that Jie Chen and I published back in 2005 in the Journal of the Historical Society on realignments we found the last New Deal election was probably 1968. At that point, we enter a new political era. We are planning to redo that paper, because time series statistics have developed a lot and there’s a lot more data. But I think it is safe to say that the period after 1968 wasn’t as Republican-dominated as is often said, since the Democrats held the Congress through into the 1990s. But I would say this: that period was pretty plainly one in which organized labor declined steadily. If you want a simple index, just take the percentage of the workforce that’s unionized and watch it, and it goes down, down, down, down. Particularly in the private sector now, it’s microscopic at about 6 percent. That’s a real realignment, I think, from the perspective of investment theory.
Today, we see that the wealth effect that resulted from the Fed’s quantitative easing policies, especially after 2020, had a major political implication. The enormous boom in financial and housing wealth accrues principally to the top income brackets. What this means is that even discounting inflation, the weight of the billionaire and near-billionaire groups has greatly increased. You just see this simply by counting billionaires who can’t qualify to make the Forbes 400. It’s remarkable: there are now almost as many billionaires who don’t qualify for the Forbes list as there are on it.
Large chunks of the economy are restructuring around this redivision of income. Politics is an integral part of that. I find reporters are increasingly comfortable writing up whatever billionaires have to say without including criticisms. For example, Kamala Harris brought a large number of billionaires into the campaign. Reid Hoffman actually said something to the effect that “I’m going to take her around and support her, but we have to get Lina Khan out of there.” What counts as acceptable behavior is changing a lot, because the safeguards that used to be in the system are gone.
Now that brings me to one of my favorite points. In my book on the investment theory of parties, Golden Rule, I had an Appendix on what I called the “black hole theorem” of the press. If you’ve got a for-profit press dominant, there’s all kinds of things they will not print, because it will hurt their owners’ interests if they do. Daniel Chomsky has published several excellent papers using the archival collections of publishers and editors of major papers that show how this works. But this year you could see the devastating impact of what you might call the “loss function” of excluded information from the for-profit news coming right up front. At the Washington Post and the Los Angeles Times, the owners just intervened and said “we’re not going to endorse anybody.” This is not an autocratic aberration, it stems from the development and consolidation of profit-oriented markets for information.
The consequences in the blogosphere are not edifying either. Various tabulations are around of how many so-called influencers are active that don’t fit into mainstream media, but the crucial point is that this influencer culture is permeated by a money-driven, product-selling logic. The apparent multiplication of media that’s supposed to be small and uninfluenced by money is an illusion. There’s a kind of Jacksonian-press efflorescence of outlets, but not real qualitative variety. When printing underwent technical innovations in the early nineteenth century, what you actually saw were all kinds of folks subsidizing small papers, either directly or indirectly. Larry Goodwyn made the point crystal clear in his memorable study of Populism, too. Then as now, the parties, the White House, and media elites collaborate on standard narratives which are retailed around. I use the term carefully—this is done over email and through teleconferences of influencers. They believe they’re getting inside information when in fact they are just getting the party line. As Goodwyn said, a big reason for the Populists’ relative success was that they had a press of their own.
tb: There’s almost a sort of neo-Sunbelt shift, right? Elon Musk has moved to Texas. Texas and Florida seem poised to expand even further their share of the population and the Electoral College.
tf: Fair enough, but the biggest state for data centers is Virginia. And the Northeast is not full of people clamoring to increase unionization in biotech or other high-tech enterprises.
The advent of private equity makes a big difference. They are not simply hedge funds or passive asset managers. They actively manage companies. They’re usually harshly anti-union. The spread of private equity into the rest of the industrial structure has been very marked. But that whole area of financial control of non-financial companies needs more analysis.
tb: In 2020, there was private equity money on both sides.
tf: But the big players were for Trump as my colleagues and I showed in detail. It was the same thing in 2016, and I am sure that’s going to come out in 2024 too. The really big private equity firms are mostly heavily Republican.
Look, when you don’t have the data, you don’t have the data. People who are reporting on the 2024 election now are using stuff that came out in October. End of the election stuff with the FEC has yet to appear.
What my colleagues and I find repeatedly is all kinds of people using different forms of their name and their employers. I started doing this by hand in the ‘80s and ‘90s on data that would be printed out for me and alphabetized by friendly FEC folks, all of whom have left that agency. Name variations and affiliations cause lots of problems. My favorite, one I remember clear as a bell, is a guy who claimed he had no business attachment whatsoever. He was actually the chairman of the largest health insurer in the United States. But he just listed himself as retired.
Jorgenson, Chen, and I wrote a paper on the 2012 election in which we spelled out a lot of these data problems. They have not been fixed by the FEC or others. The industry assignments are not super reliable. An antitrust lawyer told me the blunt truth, which was that the firms often don’t put the correct classification numbers down because they want to do mergers or stay out of an antitrust suit. Also lower-level folks sometimes just fill out these forms with what they reported last year.
I’ve always thought the heart of realignment was the reconfiguration of the industrial base—in other words, the people paying. When those figures change, the system changes. And they will then help reconstruct the system from the top down, just like the Texas oil guys I wrote about in the New Deal.
For realignment to occur, you need a government that really wants to restructure the system, solidify new configurations, and bring forward more radical demands. We may see that come January. You know you’re not in Kansas anymore when Dr. Oz is nominated to be in charge of Medicare.
On October 28, the Israeli Knesset voted to shut down the operations of the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) and to designate it as a terrorist organization. While this drastic attack on the UN was met with widespread condemnation from the international community, it was not wholly unexpected. For decades, Israel has regarded the number one provider of education and humanitarian services to the Palestinians of Gaza with contempt and suspicion. Just earlier this year, in response to still-unsubstantiated Israeli allegations that UNRWA employees took part in the October 7 attacks, the United States led a series of countries in terminating funding to the UN organization.
The month of October marked a sustained escalation of the Israeli genocide in Gaza, with particular brutality inflicted on Palestinians in the northern Strip. Amid scenes of devastation, bound and blindfolded men, and expulsion marches, the sustained deprivation of aid has caused yet more widespread suffering. A letter from the United States issued on October 13 warned of consequences should the Israeli government not increase aid flows into Gaza in the following thirty days. The deadline has passed, with aid at its lowest level in eleven months, and no consequence has been forthcoming.
To understand the relationship of Israel and the US to UNRWA, its place within the broader ecosystem of aid organizations across Palestine, and the weaponization and politicization of aid delivery, we spoke with Lisa Bhungalia, author of the recent book Elastic Empire: Refashioning War Through Aid in Palestine. The interview, conducted before the Israeli Knesset vote, has been condensed and edited for clarity.
An interview with Lisa Bhungalia
Jack gross: In January, the United States terminated funding to UNRWA. What should we understand about this decision, and its impact on aid provision in occupied Palestine?
lisa bhungalia: Yes, in January the US paused its donations to UNRWA following allegations made by Israel that twelve (this was later increased to nineteen) UNRWA employees, out of roughly 30,000 UNRWA staff, had links to October 7. Even as Israel failed to provide credible evidence to substantiate its allegations, the United States, alongside fifteen other countries, suspended their donations to the refugee agency. Nearly all countries have since restored funding following independent investigations into Israel’s accusations. but notably, in some cases, some of those restored funds have been earmarked for “risk management” (that is, an emboldening of a counterterrorism paradigm and attendant policing and surveillance mechanisms into civilian aid flows).
Meanwhile, in the United States, Biden signed into law HB 2882 (or the Consolidated Appropriations Act, 2024) in late March, which includes a provision that prohibits funds from being used for UNRWA—so now there is a legally sanctioned, wholesale cutoff of US funds to UNRWA—the US was UNRWA’s largest donor, providing over a quarter of the agency’s budget. Moreover, the Knesset recently passed legislation designating UNRWA as a “terrorist organization” and banned the UN agency from operating on Israeli-controlled territory. The consequences of this designation are significant due to the fact that the designation mobilizes a “no contact policy” thereby prohibiting any direct interaction between Israel and UNRWA, a prohibition with especially insidious implications as UNRWA must structurally interact with Israel to carry out its humanitarian operations in the West Bank and the Gaza Strip. The legislation is expected to lead to the closure of UNRWA’s East Jerusalem headquarters and will effectively block the delivery of humanitarian aid into Gaza via Rafah. Israeli lawmakers directly cited the January allegations when drafting this legislation.
Notably, Israel’s original allegations came directly on the heels of the International Court of Justice ruling in January, which determined that Israel is plausibly in violation of the Genocide Convention. I won’t rehearse the political motivations behind Israel’s timely maneuver here, though these are likely clear; rather the story of UNRWA indexes a different kind of war, one enacted through laws and lists which mobilize a politics of ban, sanction, and punishment on targeted entities.
Just to lay bare the mechanics of what has happened in the case of UNRWA, here we have an agency consisting of nearly 30,000 employees of which nineteen are alleged to be linked to a crime. This allegation, in turn, constitutes grounds for the termination of all funding to the said organization—this is the fungibility argument written into US (and Israeli) counterterrorism law, which holds that any support to a designated terrorist entity couldpotentially free up other resources to carry out prohibited acts; therefore any support to the said organization is banned.
The salient point here is that this current moment and developments therein animates the surfacing of a different kind of war, one that has developed largely in the shadows over the course of the last three decades. This war has a history which really takes shape with the Oslo Accords, Bill Clinton and Executive Order 12947, Oklahoma City and the passage of the “material support ban” in 1996, and the subsequent birth of the “list-based approach to terrorism.” The body of law surfacing here, which criminalizes the “financial foundation of the global terror network” (these are George Bush’s words) effectively imposes a relation of ban on the designated entity by prohibiting relations with and financial flows to the blacklisted entity enacting what I have called elsewhere, “asphyxiatory violence,” a modality of violence that realizes its destructive effects through less spectacular means than a bomb or tank, and instead through a quieter, temporally stretched process of constriction, one that progressively erodes conditions of livability through forced disconnection and isolation.
Now that Israel has designated UNRWA to be a “terrorist organization,” it is hard to see how UNRWA will be able to continue operating in the West Bank, East Jerusalem and Gaza given its forced structural entanglement with Israel, as Israel controls the entirety of the Palestinian occupied territories including the internal and external borders. While Israel’s campaign to undermine UNRWA is decades-long, it appears that the “terrorist” designation might be the act that ultimately collapses the agency, the consequences of which are dire especially, but not exclusively, for Palestinians in the Gaza Strip at this very moment.
Jg: Palestinians are “aid dependent” as the term goes, and the politicization of that fact is not a new phenomenon. What is UNRWA, and what is the broader aid landscape throughout occupied Palestine?
lb: Palestinians are heavily aid dependent due to ongoing processes of dispossession and a decades-long occupation, which have, among other things, undermined their ability to develop a self-sustaining economy. This feature was structurally built into the Oslo Accords. Following the Oslo Accords in the 1990s, there was a very sharp uptick in foreign aid—intended, the argument went, to build the institutions for a future Palestinian state. As the occupation never ended, the latter has yet to become a political possibility.
We can start with UNRWA. Established in 1949 by the UN General Assembly in the aftermath of Israel’s founding and the concomitant displacement of over 700,000 Palestinians, UNRWA was tasked with a mandate to provide assistance and protection to Palestinians who lost “both home and means of livelihood” and their descendants. The only UN agency concerned with the plight of Palestinians specifically, UNRWA remains the principal aid agency providing critical humanitarian assistance, food aid, relief, and other services to Palestinian refugees in the Gaza Strip, West Bank, and in the surrounding Arab states of Syria, Jordan, and Lebanon.
UNRWA’s mandate is distinct from that of the UN High Commissioner for Refugees (UNHCR) the latter of which, as legal scholar Hanin Abou Salem points out, seeks to eliminate refugee status through the “medium of local integration in the host country, resettlement in a third country or repatriation when possible.” UNRWA, on the other hand, has a mandate to administer assistance and protection to Palestinian refugees until a just settlement to their plight is achieved, which includes the option to return to the homes from which they were displaced as enshrined in UN Resolution 194. Accordingly, UNRWA’s mandate does not seek to eliminate refugee status barring this political outcome. As such, UNRWA is unique in that it maintains a longstanding commitment to one group of refugees, the Palestinians—a group that today constitutes about 5.9 million people eligible for UNRWA services. UNRWA today manages what was supposed to be a short-term humanitarian crisis, one that continues apace seven decades later.
Beyond UNRWA, there are many different aid actors at play, including bilateral and multilateral agencies, international NGOs, Palestinian NGOs, private contractors, and grassroots organizations all of which operate within and are beholden to specific national, institutional, and legal pressures, contexts, and frameworks. I will focus primarily on USAID in our discussion today—particularly since Washington has indicated its intent to repurpose aid away from UNRWA and towards USAID and its partners on the ground, who manage aid projects on the ground. From 2021–2024, USAID, it is estimated, will distribute about $500 million in Gaza and the West Bank.
One more scene-setting point here is that everything we are talking about today needs to be seen in a broader context in which the US provides Israel with $3.8 billion of military aid annually. The US has distributed over $228 billion in military aid to the country since its establishment. Israel is the largest cumulative recipient of US aid since World War Two, and just since October, it has received over $17.9 billion in aid. Everything must be seen in light of the magnitude of these figures and the relationship it illuminates.
dylan saba: Your book studies how counterterrorism measures in the United States have come to shape every part of the aid complex in Palestine, turning all kinds of aid-dependent activity—from education, to civic engagement, to food and survival—into another arena of surveillance and control by the occupation. How did the securitization of aid developed since the early years of the War on Terror?
lb: There is much to say on this, and the United States is not alone in its weaponization of aid to the Palestinians. It is, however, an especially influential player that has set into motion processes of intensified aid securitization that have been emulated—to different degrees—by nearly all western aid agencies operating in the West Bank and Gaza Strip. US counterterrorism law is a particularly significant part of the story here. US counterterrorism laws, sanctions and blacklists are infused into US civilian aid flows administered to Palestinians, and the impact of this is what I’ve studied and written about in my book. While the counterterrorism paradigm has been emboldened since September 11, it is by no means new. In fact, as I argue in my book, the 1990s and the Oslo Accords in particular constitutes a critical period in which the groundwork for everything that happens post-9/11 is established. But it goes back even further.
The US Foreign Assistance Act of 1969 effectively stipulates that UNRWA must ensure that no US aid goes to “any refugee that is receiving military training from a member of the so called Palestinian Liberation Army, or who was engaged in any act of terrorism.” As Darryl Li points out in a report published jointly by Palestine Legal and the Center for Constitutional Rights, this is the first time that the term “terrorism” appeared in a US federal statute.
The 1990s, as noted earlier, was a critical period in which the legal foundation for this counterterrorism infrastructure was established. In 1996, Congress passed into law, as part of the Antiterrorism and Effective Death Penalty Act (AEDPA), an exceedingly broad ban on providing “material support” to US-designated terrorist entities. And just before that Bill Clinton signed into force EO 12947 in 1995 which blocked assets in the United States of “terrorists who threaten to disrupt the Middle East peace process.” EO 12947 imposed US sanctions on designated entities and prohibited transactions with them. Clinton’s order identified twelve organizations it deemed to pose a threat to the Oslo Accords, including Hamas, Palestinian Islamic Jihad, and Hezbollah, as well as eighteen individuals associated with them, as “Specially Designated Terrorists” (SDTs). This marks the beginning of the shift to a “list-based” approach to criminalizing support for terrorism, wherein any support to or contact with a blacklisted entity is rendered criminal under US law.
Later on, in the post-9/11 moment, the language of “association” was added to the prohibition on material support, which greatly expanded the activities and relations that could be considered criminal under US law. The “association” framework has been particularly damaging in the case of Palestine as many NGOs and contractors receiving US funds police far and wide to ensure they do not run afoul of US terrorism laws and sanctions policies.
A number of oversight and compliance mechanisms have been integrated into US aid flows in Palestine to ensure compliance with US laws and sanctions policies. For example, in 2003 USAID integrated anti-terrorism certification (ATC) into its grants and cooperative agreements in Palestine, which served as the entrypoint for my study of aid politics and the security state in Palestine. The ATC is connected to an Executive Order signed by George Bush in September 2001, marking the onset, at least officially, of the “financial war on terrorism.” Executive Order 13224 significantly expanded the power of the US Treasury to target the “financial infrastructure of terrorism” casting an ever-expansive net on who and what could be sanctioned by the US government. The Order, among other things, created the Specially Designated Global Terrorist (SDGT) blacklist, consisting originally of twenty-seven organizations and individuals, which has since grown to tens of thousands of entries. It also broadened the scope of those targeted from individuals directly belonging to “foreign terrorist organizations” to those deemed “otherwise associated” with an FTO and nullified the humanitarian exception in the 1977 International Emergency Economic Powers Act (IEEPA). So basically now humanitarian actors, NGOs, etc could potentially be prosecuted if they provided aid to designated “terrorist entities” or operate in “terrorist-controlled” territories.
On the ground in Palestine, what this has meant for NGOs and contractors receiving US funds is that they must monitor the recipients of US-administered aid to ensure they aren’t working with or associated with anyone designated by the United States as a “terrorist entity”—a classification assigned to a number of Palestinian parties, factions, and political groups.
ds: Can you tell us more about the crucial role that USAID plays here? How does it operate in Palestine, and what is its role in implementing the antiterrorism legal regime you describe?
lb: USAID operates almost exclusively through what I call the intermediary sphere—that is the broad nexus of international NGOs and private contractors awarded USAID grants and contracts that then, in turn, implement aid projects in Palestine whether through partnership with local organizations or through direct implementation on the ground. These bodies constitute a critical infrastructure or set of nodes through which US counterterrorism law is transmitted and projected onto landscapes and bodies afar. Referred to by one aid worker in Palestine as USAID’s “many arms,” these intermediary bodies are responsible for undertaking a number of policing and surveillance functions to ensure compliance with US legal mandates and sanctions regimes.
The contractual relationship to which these bodies are enlisted is best distilled in a document integrated into the USAID WB/G Mission in 2003, Mission Order 21. Mission Order 21 functions, in essence, as a technology of risk transference as responsibility for upholding the US counterterrorism regime is offloaded onto the international bodies that handle US aid monies resulting, as I have traced in my book, in a diffusion of securitized managerial power. Among the functions these contracting agents are required to carry out some include: collection of the personal information of key individuals and organizations receiving US funds under an award to be screened or vetted against US intelligence and counterterrorism databases; obtaining of anti-terrorism certification from prospective aid grantees, in which the prospective recipient must denounce terrorism and pledge not to work or associate with blacklisted individuals or groups; and upholding restrictive clauses in funding agreements.
Concern over potential violation of US counterterrorism law has meant that many NGOs and contracting agencies receiving any kind of US funding have built expansive surveillance and policing mechanisms into their aid programming, such as screenings, certificates, and restrictive contractual terms, and in some cases have cleaved off entire regions, spaces, and municipalities (coded as “derog”) from aid flows to protect themselves against legal violation and related punitive measures. As the director of one international NGO handling US funds in Palestine remarked to me when I was conducting research for my book, “money does not go to anything that is considered risky by law.” Meanwhile, the director of an organization receiving US funds for a Palestinian youth democracy project shared with me that entire municipalities were simply preemptively eliminated from project inclusion. Routinely, US-funded contractors talked about how they had incorporated expansive policing mechanisms and preemptive strategies to ensure they were viewed as low risk bodies by those administering US aid contracts, in turn, lending a power to the US security state that it might not otherwise have. In the case of one US-funded NGO operating in Gaza, the organization’s activities, in toto, were cast in the ambit of suspicion. The NGO’s Gaza program director revealed that they had to be excessively cautious about initiating contact with any individual or organizational body “outlawed by the US government.” As he told me, a colleague in their Jerusalem office spends the majority of his time checking the names they submit against the US Treasury “Specially Designated Nationals and Blocked Persons” list.
One distinction to underscore here is that between US funds channeled through a multilateral organization, such as UNRWA or another UN agency, and those administered bilaterally through USAID. UNRWA is not exempt from US security and counterterrorism mandates, though aid securitization in the UN context plays out somewhat differently. Frictions resulting from incongruencies and contradictions between UN counterterrorism regimes and those of individual donor states have long been discussed in legal and policy circles. UNRWA has been mandated to uphold US counterterrorism policies and conditionalities from the late 1960s onwards. The Framework for Cooperation between the United States and UNRWA, for instance, stipulates that UNRWA undertake “all possible measures” to ensure that no part of US money is used “directly or indirectly, to provide support to individuals or entities associated with terrorism.” There is, nonetheless, some level of protection afforded to UN agencies to ensure that the counterterrorism-related policies of foreign states do not entirely usurp other humanitarian and ethical considerations, including those enshrined in international humanitarian law.
This would not necessarily be the case for US bilateral aid flows, as NGOs, contractors, and other intermediary aid agents receiving US grants and contracts would necessarily interface principally with, and are accountable primarily to, Washington. As noted in a study published by the Counterterrorism and Humanitarian Law Project, the United Nations and other multilateral and international humanitarian organizations “do not typically treat counterterrorism measures as a standalone set of concerns” but rather see them as one element among a broader field of considerations that must be weighed when implementing humanitarian programs and practices. Counterterrorism legislation, on the other hand, begins with the premise that one party of a conflict is (or may be) criminal and on this basis can exclude aid. Moreover, even if one is deemed a combatant and thus excluded from receiving aid under international humanitarian law, the relation of exclusion would not extend to the combatant’s family or dependents. This is not necessarily the case with US counterterrorism laws and policies, and the broad associational logic that underwrite them. Thus, the repurposing of US funding from UNRWA to USAID and other agencies could, very conceivably, create new forms of exclusion within the Palestinian refugee pool. The implications of such a possibility are indeed grave both in terms of meeting immediate humanitarian needs in Gaza, as well as for future prospects of rehabilitation and reconstruction.
Jg: Your book describes a number of cases where that compliance role creates incredibly demobilizing divisions among Palestinian groups trying to organize politically and develop various programs for their communities. Could you tell us about how the securitization of aid plays out for civil society groups in Palestine, how people navigate the fear of sanction and the divisions that fear stokes?
lb: Palestinians have adopted numerous strategies to negotiate deepening processes of aid securitization. Some have opted to refuse US funding all together. In 2003, for instance, the Palestinian Nongovernmental Network (PNGO) announced a boycott of USAID in response to the integration of “Certification Regarding Terrorist Financing” (this is connected to EO 13224 which I spoke about earlier) into grants and cooperative agreements which had to be signed by Palestinian NGOs prior to entering into a funding agreement. PNGO expressed concern that Palestinian NGOs were being required to sign a document stipulating that they would sever relations with entities and individuals designated by Washington as “terrorist” – a classification, as mentioned earlier, that includes many figures, movements, and parties long considered part and parcel of the Palestinian liberation struggle.
And of course it is not lost on Palestinians how almost any activity, behavior, or act of speech that challenges their subjugated position within the current political order in Palestine is scripted as a security threat and is almost reflexively equated to terrorism. To sign the ATC was seen as a direct sanctioning of the conjoined Washington-Tel Aviv position that criminalizes in toto all but Palestinian complacency under conditions of ongoing dispossession. As one interlocutor told me, “No group actually wants to use the funds to support terrorism. Rather, this is a battle over principle. Who has the power to define?” The ATC, in other words, was understood by many in Palestine as a technology of counterinsurgency and proxy warfare.
Other Palestinian groups and organizations opted to accept US funding and to negotiate, to the best of their ability, the security relationship into which they were enrolled. In one instance, a Palestinian youth organization had developed a youth shadow council project in an attempt to imbue a sense of local politics and empowerment among Palestinian youth, especially as the national sphere had been deeply compromised by the deep enmeshment of the Palestinian Authority with Israel. They had completed the first phase of the project with European funding. However, when their funding ran out, they were approached by an international organization that wanted to work with them to complete the second phase of the project with USAID money. This prospect triggered a long series of intense conversations within the Palestinian organization about whether to refuse US funding altogether or operate under the compliance constraints though to do so without compromising their principles. Part of the debate centered on the acknowledgment that foreign aid is so compromised regardless, whether it comes from the US, the EU, or other bilateral and multilateral donors, and thus much of their discussion focused on which restrictions they felt that could work within. The organization eventually decided to take USAID funding.
What is interesting about this case is that the organization could not, with US funding, establish youth shadow councils in any municipality that had elected members on the municipal council belonging to groups designated on US terrorism lists. Accordingly, the organization had to preemptively eliminate any municipality fitting this criteria in the pursuit of its youth democracy project. As predicted, this posed a number of ethical dilemmas for the organization and their longstanding relationships on the ground with “banned municipalities.” In addition, the US counterterrorism requirements profoundly shaped project implementation as the organization was forced to circumscribe their work primarily with smaller municipalities void of city council members belonging to prohibited groups. Moreover, the irony of upholding a foreign prohibition on the inclusion of political parties in a democracy project for Palestinian youth was not lost on this organization, its youth base, and beneficiaries alike resulting in the erosion of this organization’s credibility on the ground.
In many cases, intensified aid securitization produces very real kinds of fragmentation and division on the ground, including a void of services and critical aid where it’s needed because you have a municipality with a municipal council seat belonging to a proscribed group, whether the PFLP (Popular Front for the Liberation of Palestine), Islamic Jihad, DFLP (Democratic Front for the Liberation of Palestine), or any number of groups. It’s not just Hamas. That’s the one we most often cite. This fragmentation, these geographies of division and isolation, are produced across multiple scales and sites in Palestine. Obviously we have seen it in the case of Gaza and we’ll see it in much more pronounced fashion if these aid intermediaries—including the private contractors being touted by Washington right now in its latest scheme—are tasked with reconstruction in Gaza, a place where Hamas will invariably have a presence.
ds: The negative obligations of the aid system are so extreme that they undercut the positive mission of the overall project—to provide humanitarian assistance to a population that needs it. Do you see that as the result of mission drift? Or, to put it another way: given how crucial the ability to cut off aid has been for the genocide in Gaza—and the longstanding tactic of fomenting splits and divisions within the Palestinian national movement, not dissimilar from the story you just described—should we understand control over aid as part of a strategy for achieving particular political objectives?
lb: It’s a great question, and a difficult one to answer. I hesitate to ascribe too much coherency to this moment. I can offer some speculation regarding how we might make sense of recent shifts and reconfigurations in aid flows (and their arrest) especially in regards to UNRWA.
The pivotal role UNRWA plays in maintaining the political category of the Palestinian refugee is not lost on Israel. Israeli officials have long campaigned, and now more vociferously than ever, that UNRWA be dissolved. As Netanyahu stated bluntly in 2017 following a meeting with then US ambassador to the UN Nikki Haley, “It is time the UNRWA be dismantled and merged with the United Nations High Commissioner for Refugees.” Situating the recent uptick in attacks on UNRWA in a longer history, Hassan Barari, professor of international affairs at Qatar University argues that these attacks are a continuation of Israel’s longstanding attempt “to defund UNRWA in order to kill the refugee file from any future negotiations.”
It is thus necessary to situate the escalation of attacks on UNRWA within this broader context. Relatedly, the concomitant reshuffling of US aid flows in recent months, including the termination of US contributions to UNRWA and a reshuffling of some aid through the State Department, USAID and “its partners on the ground,” and other UN agencies can read as a clear signaling that Washington has opted to more directly facilitate the goal of UNRWA’s unraveling through a form of “managed collapse” enacted through a gradual devolution of critical aid functions UNRWA has long carried out to other UN and bilateral agencies. This is not a new strategy, as one former UNRWA employee disclosed in a discussion we had this past summer, but rather one that has been discussed in top governmental circles for years. Such a strategy seeks to dissolve UNRWA as an institution while rolling out its functions to other agencies that notably do not serve the specific political category of the Palestinian refugee. Moreover, with respect to the repurposing of aid to “US partners on the ground,” this would serve a hyper-securitized function in direct service of Israel’s broader political aims.
ds: The current war has ushered in untold devastation, both of human life and infrastructure, which I think generally is viewed through the lens of wanton destruction and genocide. There is another dimension developing through these aid flows: the dire need for reconstruction itself creates a political void for the regime of counterinsurgency to fill. What are you looking at when you think about the reconstruction of Gaza? How is targeting UNRWA part of Israel’s broader strategy?
lb: Israel’s strategy, it seems, finds coherence on a few different levels. The first seems to be about eliminating the category of the civilian from Gaza—discursively and quite literally. Part of this strategy is about collapsing and subsuming everything and everyone in Gaza, and now indeed Lebanon, into being “terrorist affiliated”—all infrastructure: hospitals, entire neighborhoods, cities, anyone in a particular WhatsApp group etc. The goal geopolitically and materially, it appears, is to steadily depopulate the Gaza Strip. We are seeing this most aggressively right now in the North with the partitioning of the strip, consistent bombing, and nearly full blockage of all aid. The attacks on UNRWA are part of this strategy: here we are seeing an attempt to eviscerate the political category of the Palestinian refugee through a collapsing of the agency that materially sustains refugee life. UNRWA’s collapse would of course not change international law but it would eliminate the institutional infrastructure that sustains refugee life. UNRWA indeed has to be at the center of any discussion about what’s happening right now—in no small part because of the integral role that UNRWA plays in enshrining and protecting the Palestinian right of return. There’s a clear intent to undermine UNRWA, potentially to the point of collapse, while repurposing those aid flows to other UN agencies without the specificity of UNRWA’s mandate regarding the Palestinian people.
Healthcare and education are two of the most important sectors of the US economy. Together they comprise over $8.44 trillion in annual expenditure. When including the $1 trillion-plus health insurance industry, these three industries of private education and healthcare, public education, and insurance carriers altogether comprise some 32 to 33 percent of GDP —larger than manufacturing (25 percent) and nearly four times as large as all construction (8.6 percent).1 For nearly every national election in living memory, at least one campaign issue has centered on this socially necessary complex of schools, hospitals, pension funds and health insurance.
And yet in the 2024 US presidential elections, the economic future of these crucially important sectors of the American economy are far from the center of campaign rhetoric. While Tea Party concerns about government “death panels” have grown into Ron Johnson-Marco Rubio bans on “critical race theory” and “gender insanity,” neither the basic structure of payments or employment in the sprawling network of “care industries” on which the quality of American life rests is up for debate in the November 2024 contest.
To ask about the greater meaning of the “care economy” and its absence from US party politics, PW spoke with Gabriel Winant, an economic and social historian of the US healthcare industry at the University of Chicago. Winant has argued that the growth of care employment has been a decisive characteristic of capitalist development over the past century, one driven by political systems of both the right and the left—not always intentionally, but persistently nonetheless—as patterns of family care organized around the family wage dissolved. Necessitating new forms of socialized care for an aging population and insecure workforce, these transformations leave both business and the state searching for solutions neither seem able to propose.
An interview with Gabriel Winant
Andrew elrod: The health insurance issue seems conspicuously absent from the election. What do you make of that?
gabriel winant: In some ways, both parties would find it convenient for the issue to be absent. But despite their efforts—partly to suppress it and partly to express subsections of the issue opportunistically—the social service industries nonetheless have a way of working themselves back toward the surface.
Just a few examples: JD Vance has talked about repealing Obamacare, without acknowledging that’s what he’s talking about. He’s floated the idea of separating more acute, sicker healthcare subscribers into their own insurance pools—which would basically repeal Obamacare’s pre-existing conditions regulation. But when pressed, he denies it, which is symptomatic of the general way that Republicans can’t generate a coherent popular line on healthcare. That arises from the pathologies of the sector itself. Republicans learned their lesson on Obamacare. It was politically remunerative to them for years to campaign against Obamacare when it was unpopular. The turning point was the struggle over “repeal and replace” in 2017—public opinion had changed. Enough people had become enrolled in Medicaid through its higher income eligibility and in other plans through the subsidies for the exchanges that Republicans can no longer actually campaign against it openly. They may translate it into questions about gender-affirming care or reproductive care—which is also a way of talking about it without talking about it. But unlike before, they’re not campaigning on private “health savings plans.”
The Democrats have a different problem: they’re accountable to conflicting constituencies, one of whom is the master, one of whom is not. If there were a primary process, the politically weaker left wing of the party would have had a chance to assert itself and extract some symbolic concessions, given the popularity of lowering healthcare premiums, rolling back hospital prices, and expanding Medicare and Medicaid coverage as voting issues. Harris would now be trying to back away from certain political concessions to the left. That was how she came to endorse “Medicare for All” five years ago.
Since there was no competitive primary, Harris has the opportunity to outline a healthcare policy program with a somewhat freer hand. So far, she has largely avoided it. But there are a few notable policy proposals. One is to extend Medicare to cover in-home care, which is quite consequential and significant. She’s also made some noise around medical debt. Democrats are potentially flirting with the federal government funding states more generously in return for cancellation of medical debt.
But there is no proposal to structurally re-engineer the industry. Healthcare has been an issue that Democrats owned for a long time. But they’ve always tried to serve conflicting constituencies: the hospital industry, the insurance industry, organized labor, the medical lobby, the different forms of patient organization, of which AARP is probably the most significant. The Democrats’ general strategy is to play these constituencies off against each other, to give with one hand and take with the other, to try to keep the most powerful sectors of the industry relatively pleased. Today, those most powerful in healthcare are the hospitals and the insurers. Doctors have lost a significant amount of power. In the 1940s, the AMA was the most important factor in the defeat of Harry Truman’s national health insurance plan. That’s changed as doctors have been subordinated to hospitals, private finance, and, to some extent, insurance companies. So the Democrats hash out this unstable working compromise among these groups, hemming them in a little bit on the antitrust side but then subsidizing them on the welfare state side. That’s why they don’t want to talk about it too much.
ae: This pattern also seems to lay beneath the secular cost increases in the industry. Before the pandemic, policy agendas within the Democratic Party seemed open to some kind of structural reform to arrest this creeping inflation. In 2018, for example, the Center for American Progress published a report on hospital price controls. In 2020 and 2021, some structural reform seemed possible—whether through expanding Medicare over hearing, vision, and dental; or direct government-owned pharmaceutical production. There was an agenda, at least.
gw: I think there is a logic which has restricted the social democratic-reformist impulses within the Democratic Party. Defeating Trump and Trumpism was initially understood to involve some amount of significant reform to labor policy and social policy. Gradually, this devolved into a kind of Cold War-liberal view of intensifying geopolitical confrontation with China, requiring internal political repression within the Democratic Party coalition. Under the continuous banner of defeating Trump, there was a move from a cautious detente with the left to a rejection of the left. That same political logic is probably at work with the care economy too.
The care coalition is big, but fragile. So you can’t contemplate a big divisive structural change to anything. Everyone remembers how Obamacare consumed the entirety of Obama’s first term. Although it succeeded legislatively, it spawned the Tea Party and prevented any other major legislative initiative for the rest of his presidency. And Obamacare was engineered to balance the coalition—it was a huge giveaway to insurance companies. So the lesson looms large. As a consequence of this internally repressive political orientation to stopping Trump, and thereby also maintaining US primacy globally, the appetite among Democratic elites for structural reform in healthcare has disappeared.
Defining the “care economy”
ae: Industries usually lumped into the “care economy” along with hospitals include nursing homes, childcare, and K-12 education. These four sectors share certain economic characteristics: they are labor-intensive, facing growing labor costs; they have some access to government subsidies, whether municipal, state, or federal. What else do they have in common?
gw: The care economy is basically healthcare, childcare, education. In the US, the fundamental division in healthcare structurally is the division between payer and payee. The payer is the insurance company, although obviously behind the insurance company—or next to it, or in the absence of an insurance plan—is the actual patient. Providers are hospitals, doctors offices, and other kinds of health-service institutions, such as home health agencies and nursing home companies. We’ve organized the healthcare system structurally around an antagonism between payer and payee, insurer and provider, and there’s been many decades of efforts to manage its consequences. There exist now many merged payer-payee entities: that’s an HMO (health management organization), where either an insurance company started owning hospitals or a hospital wanted an insurance plan. There are public payers—Medicare and Medicaid—that account for about a third of the whole market.
Medicare is a federal entitlement that you qualify for at age sixty-five. The prices that it pays to hospitals and doctors and drug companies—its reimbursement rates—are set by the federal government. Now, Medicare has been burrowed through by private interests—pharmacy benefit managers, “Medicare Advantage” plans, etc.—which represent partial privatizations of different aspects of the Medicare insurance process. But it still remains, nominally, a universal federal program.
Medicaid, by contrast, is a state-federal cooperation, as many “welfare” programs are. It was conceived of as a program for the poor, akin to what was then called Aid for Families with Dependent Children (AFDC), which is the thing that we call “welfare,” which is today Temporary Assistance for Needy Families (TANF). (In fact, it was common in the early days of Medicaid that the way you got enrolled was at the “welfare office.”) As a means-tested poverty program at the state level, Medicaid has parameters in place. The states receive federal funds, they contribute their own funds in different amounts, they set various rules about eligibility for the resulting program, and about reimbursement rates and any kind of regulatory strings attached to reimbursement. If a hospital or a nursing home wants to be paid by Medicaid—as the vast majority do—they are complying with federal and state rules.
Because it was a poverty program, and because it has a budget-constrained state administration, Medicaid reimburses at lower rates. A hospital would rather have a Medicare patient than a Medicaid patient, if it has the option. (Eds: a nursing home doesn’t have the choice, as Medicare pays only limited long-term care benefits.) This division also drives reorganization among owners, both public and private, as services are divided across the provider into Medicaid and private insurance-serving establishments—the services become partially segregated. States are more budget constrained than the federal government, and for both political and fiscal reasons they’re likely to try to restrain the program. Nonetheless, Medicaid has grown enormously over the last generation. It has shed its character as welfare healthcare and is now the biggest insurer in America (Medicaid covers approximately 72 million people, compared to Medicare’s 67 million).
It’s important to remember the state-level struggles following Obamacare—the Supreme Court gave the states the right to opt out from Medicaid expansion; many conservative states did. They wouldn’t have had to pay for the expanded coverage, they just didn’t want expansion of the welfare state in their jurisdiction.2 Then in many states like Idaho, Kentucky, Maine, and Virginia, you saw campaigns, sometimes very-grassroots struggles, which built state politics around opposition to regional Republican Party opposition and surfaced Democratic Party leaders.
Payers and payees
ae: You mentioned the shotgun marriage, so to speak, the dueling interests over the growth and regulation of the care economy within the Democrats’ political coalition.
gw: With the public programs, the government—whether federal or state—sets the prices. With the private insurers, which account for about 40 percent of the hospital market, the rates are negotiated. That negotiation has led to a generational struggle for market power between hospitals and insurers. This has sometimes appeared as a form of vertical integration, but I think more recently it’s led to horizontal integration, where hospital chains have grown as the wealthier among them buy up the more financially vulnerable to try to dominate market share, which gives them leverage on insurers. The insurers have merged and consolidated for the same reason.
This particular set of coalitions between providers and payers, of gradually expanding coverage delayed by continuously rising prices, begins in the 1980s. From its passage in 1965 until 1983, Medicare reimbursed on a “cost-plus” basis. A hospital admitted a patient, the hospital’s accounting and billing departments sent the estimated cost of all the procedures to the federal government, and the federal government basically paid them 102 percent of the costs. This created an enormous incentive for hospitals to expand. The federal government underwrote demand, but without real planning, leading to prices basically dictated by the providers. The fiscal structure thus helped enable a massive hospital capital expansion from the late 1960s to the early 1980s.
In 1982, Congress and the President pursued a Medicare reimbursement reform, which passed in 1983. This remains the most significant change to Medicare since its passage: the reimbursement structure shifted from a retroactive cost-plus formula to what’s called “prospective payment,” under which the federal administration, the Center for Medicare and Medicaid Services, breaks down all hospital procedures into hundreds of “diagnostic related groups,” and fixes a price to them, with regional adjustments and so on. From then on, hospitals know what they’ll be paid for any given Medicare patient, and they must manage their costs and operations as they see fit.
Private insurers, which are still, to a significant degree, dominated by nonprofits up to this period, followed Medicare’s lead and also switched over to a negotiated prospective-payment system following the 1983 reform. But private insurers can’t force their prices on hospitals. Unlike the federal government, they have to negotiate their prices. This begins to cause a shakeout in the industry. The hospitals have part of their income controlled; the other part they negotiate and for that they need power.
Western Pennsylvania is a case I know best: Blue Cross and Blue Shield merge to form Highmark, allowing them to negotiate hospital prices more forcefully. At the same time, the academic hospitals affiliated with Pitt consolidate and form the University of Pittsburgh Medical Center (UPMC) to buy up hospitals in the surrounding region. Now, UPMC can negotiate more favorable rates with insurers. You see how this arms race takes place. The UPMC-Highmark example is a relatively notorious case: it reached a point in the last decade that one of the biggest hospital chains in the country refused to accept payment from its region’s biggest insurer. Each was trying to squeeze the other out of the market.
ae: It’s also important to remember the reason premiums had grown so persistently: the spread of collective bargaining before the Reagan years meant that workers could re-negotiate the large group policies employers took out on their behalf. Union contracts covering millions of workers meant that employer contributions could be renegotiated upward, particularly as the hospital sector took on debt to grow in the 1970s and 1980s. The shift to prospective payment in the early eighties showed a political limit to this process, at least from the insurers and the federal Treasury.
gw: One putative solution to this problem of healthcare inflation is what’s called “managed care,” which is to say HMOs where you have vertical integration, the hospital and the insurer are the same corporation. The idea is that whatever rationing has to happen can happen internally on a kind of sound medical rationale rather than happening through an external market process. That’s the nice version of the story. The less nice version is that HMOs are incentivized to deny you care because they’re going to pay for the care by providing it themselves. The 1993–1994 Hillary program was very complicated, but managed care was central to it. HMOs explode across the 1990s.
By the end of the century, there were also about 40 million uninsured people. The linking of insurance to employment, which has its origins in collectively bargained health benefits, meant that the destabilization of the American labor market—de-industrialization and de-unionization—caused greater uninsurance by the early twentieth century. Obamacare was in part addressing that problem. In a system where healthcare is linked to employment, how do you provide health security in the absence of employment security? And the answer is, it can’t be done. And that’s why it continually arises as a kind of contradiction.
One consequence of this payer-provider conflict was that hospitals began trying to offload less acute cases, which didn’t reimburse at high rates. Those had been profitable in earlier decades under retrospective cost-plus plans, but this changed beginning in the 1980s. And thus is born the long-term care industry, to absorb forms of care that basically once happened in hospitals. Nursing homes grew very rapidly in the ‘80s and ‘90s, and by the end of the century, home health was introduced. For many years, home health aide has been the fastest growing job in America. It will continue to be for the foreseeable future.
ae: In terms of payment structures, the public education example departs here in a useful way. In public education, uniquely for middle-class and lower-income working people across most of the country, payment for the service was collectivized a century ago or more. Its survival was underwritten at various points by the federal government, though in the 1990s and 2000s politics in many states revolved around questions of state takeover to enforce budget and staffing reductions. The extent of the tax districts and their subsidies from general taxation vary. But there’s a longer history of socialized payment and government ownership.
The politics of cost are different in K-12 for that historical reason. There are still elitist and racist campaigns to limit school district revenues, but they proceed indirectly as campaigns to protect services from immigrants or as attacks on the particular service provider—rather than on the idea of it being a government-provided service.3 There’s a kind of tractable politics there that accepts as terms of debate total costs and distribution of the tax burden. But in the broader conversation around the “care economy,” even getting to the question of how much we should pay for things like mass-market health insurance, childcare, or home health services is obstructed by the prior questions about existing payment structures—the role of insurance, what existing organizations can be folded in, or whether these things should be provided by right at all.
gw: Typically the way payment manifests as a political issue is in terms of whether a political coalition can find a way to attach a subsidy to demand somewhere. On the left, we often think what we would like to do would be to take more direct control over supply, like in the public education example—and directly politicize the conditions of supply. In the absence of the political power to accomplish that, the kind of partial measure that winds up coming on the table is a subsidy—a subsidization of demand for a service supplied by some market or quasi-market institution. That’s a very politically convenient mechanism because it brings some suppliers, service providers, and clients onto the same side.
For example, home health agencies love the Harris proposal of a Medicare benefit for in-home health care. The private equity firms that have entered into the home health care space also are very happy about that idea, because Medicare reimburses at a higher rate than Medicaid. This solves the political problem in the near term by expanding the patient market, raising the reimbursement rate, and thereby presumably flushing more money into home health care—which will in fact enable more people to get the care they need and presumably raise the quality because it will raise wages, and thus draw labor into the sector where there is a systematic shortage, all while further enriching a set of for-profit actors. This is that logic of the structurally divided Democratic Party coalition that I was alluding to earlier. It’s true across lots of these industries. This is how the Democrats work—they try to strike deals to subsidize demand and thereby bridge the two class parts of their coalition.
Labor intensity
ae: In addition to “low margin” services such as long-term care, aren’t there also “high margin” services that can be performed outside a hospital setting? This would be the incentive for the growth of low-cost “urgent care” centers, which seems like primarily a way to get around union labor.
gw: Urgent care isn’t so much about getting around union labor—hospitals themselves are a largely non-union sector, still. But the basic insight is right that it’s about absorbing payment in a lower-cost setting, where deskilled labor serves a higher volume of patients with lower fixed costs.
As for long-term care: it can be paid out of pocket, which is very expensive, but many wealthy people do that. Alternatively, Medicaid pays for it. Medicare will only pay for a sort of small amount of long-term care, so for middle class people, it’s more common to pauperize yourself to qualify for Medicaid. That’s a real serious social policy dysfunction on the eligibility side. The Medicaid programs don’t currently pay that well to the providers—to the home health company or the nursing home company. The firms that operate in this layer of the market are often quite predatory and provide a lower quality of care, because they make a profit by absorbing Medicaid payments, which are not enormous, and then limiting their main cost—staff. Adding long-term care to Medicare is a good idea.
This gets to a pervasive feature of the care economy—its labor intensity. This idea is often attributed to the economist William Baumol: in “Baumolian” industries, there’s no real way of increasing productivity, at least not consistently. This is even true to a significant extent in hospitals, but it’s especially true in less capital-intensive sectors: home health care, long-term care, childcare, even education. These are sectors characterized by huge labor costs, low wages, and poor working conditions. This manifests in unreliable and low-quality service, despite the enormous costs generating massive unhappiness, obviously, on all sides.
ae: There seem to be two different economic logics in tension here. The way we usually think about the relationship of cost to quality is competition: an excess of competition drives down prices and so costs and lowers industry standards. Increasing productivity, replacing labor with capital, was a way around this—driven by the profit motive. But in these labor-intensive care industries, competition is limited (in the case of hospitals) or where it does exist prices still appear to be prohibitively expensive for households—even though the labor is cheap (long-term care, childcare). Given the structure of demand, the profit motive hasn’t seemed to bring down prices but rather the opposite.
gw: The high costs come from their labor intensive, non-productivity-increasing quality. The economies of scale that allow you to reconcile low prices with high labor costs don’t seem to exist in these industries. There’s periodically noise made that automation, or now AI or whatever, will finally crack this. I guess we’ll see. It seems implausible to me, for the time being.
What unites long-term care, childcare, even hospital care, and public education is this inability to increase productivity per person-hour—their Baumolian character. This is also part of the source of their kind of intense connection to the household. The sense that they absorb functions out of the household, because the care economy, like family economies, is attention intensive. That makes them ill-suited to so-called ordinary market institutions. The absence of ordinary market processes—like the increase of productivity, the achievement of economies of scale, the lowering of price simultaneous to the increase of volume or quality or both—makes the family and these kinds of enterprises have something in common. This is also the reason that both supply and demand flow back and forth between households and these sectors. Neither the family economy nor the care economy as it is currently organized have adequate income to provide what people continue to need, and so labor moves back and forth between them continuously looking for a better deal.
There aren’t good structures for paying for these services. Either it’s devolved onto households to pay exorbitant costs—that’s largely the story in childcare. Or Medicaid has to do it—which is the story in long-term care. Hospitals, we could tell a related, but distinct story. The pressures of economization that all three of these kinds of firms are subject to mean that they can’t pay high enough wages or hire enough staff, and because they can’t pay high enough wages to hire enough staff in their mass market versions—there are high end versions of all these things, but in their mass market versions— they deliver a poor service, or an inadequately staffed service. That’s not the fault of the people who work there. It’s because of the structure of these industries and the ways that they’re paid for.
Look at childcare. The economics of childcare are linked to the emergence of dual-earner households, especially though not only at higher points of the income distribution. There is obviously a general increase of women’s labor-force participation in the US over the whole twentieth century, but for working-class women in the post-war period, participation is significantly suppressed by the wages and benefits of collectively bargained industrial jobs for their husbands. There are many criticisms of this arrangement, but for a period of a few decades, autoworkers, steelworkers, people in the building trades, etc., earned something near family wages. This was a longstanding labor movement demand going back to the nineteenth century. So the emergence of the dual-earner household coincides exactly with the last quarter of the twentieth century, when the family wage eroded under the pressures of deindustrialization and deunionization and so on, accelerating in the 1970s.
Women were compelled to bring in some money. On the one hand, there was an enormous increase in demand for childcare as women entered the workforce under declining family wages. On the other hand, childcare was also a form of employment for women entering the labor market. When the 1996 welfare reform bill began to force women off the welfare rolls and into the labor market, child care, low-wage health care, and other personal services were the most significant destinations. It’s a very skilled job in a certain way, but the barriers to entry are relatively low. So the growth of the care economy in recent decades has been part of the turn towards the market. As women had to generate more cash for their households, they became more likely to need to pay someone to watch their kids. There’s an enormous amount of social science about how families calculate the dozens of complex trade offs—who should work and who should stay home, on what cycle, and so on. It’s a complicated development that has a kind of unequal side and a kind of progressive side also at the same time. But the jobs into which working-class women could enter were at the bottom end of the service sector.
ae: And those low-wage jobs are still apparently too expensive for companies to provide service for all the families that need it. Let’s talk about the politics of a solution here. SEIU seems to play a big part in the politics of organizing the business end of these markets. Because of this political role, I was interested to see no mention of the union in Rachel Cohen’s great debrief of the childcare campaign in congress in 2021.
The rise of the issue in many ways coincides with SEIU’s rise to political power. California Governor Gavin Newsom appointed Laphonza Butler, president of the SEIU local 2015, to Senator Diane Feinstein’s seat after her death. President Biden appointed two top SEIU attorneys to the National Labor Relations Board. But while they can win victories like gubernatorial and presidential appointments, those alliances also seem limiting to some: Butler’s appointment, for example, was a compromise to a conflict that eventually saw Adam Schiff win the Democratic primary for California’s Senate seat—over Barabara Lee and Katie Porter. How does that advance labor’s cause?
gw: It’s notable that the main union in a lot of the care economy is SEIU, which Kamala has been close to since she was a Senator, if not attorney general. To its credit, SEIU has done enormous work to put the idea of the “care infrastructure” on the table and raise the demand for new subsidies. Federal expenditure on the care economy was the Built Back Better idea. This discourse comes from SEIU and its affiliate institutions. SEIU has wrapped up the unionization of hundreds of thousands of childcare and home health care workers over the last few decades.
On the other hand, the SEIU has an organizational structure that uses workers more or less as votes in November. Of course, there are certainly many individual home health care and childcare workers who are working-class leaders, and they deserve every bit of credit. But the union seeks to leverage relationships with Democratic policymakers in state capitals and ultimately in Washington to achieve unionization through governors and state legislatures. A few weeks ago, Michigan unionized—and you can really almost call it the state unionizing the workers—its in-home health industry. The workers had to sign off in a nominal ballot. While the majority had to vote yes, the participation levels are typically very low. The workers aren’t congregated anywhere and it’s difficult to establish a real collective experience.
I don’t want to gainsay the actual economic and material improvements that are accomplished that way. But SEIU is an organization very adapted to the idea of being the mediator within this Democratic Party cross-class coalition, where it delivers for workers and with their limited participation, but not exactly through bottom-up pressure. That cross-class coalition puts limits on labor’s political program. Its internal power structure—an international convention held every four years of elected delegates who themselves elect international officers— is also quite undemocratic. Participation in its local unions is often limited, more or less depending on the region and industry, to votes in November, and open-ended strikes are rarely part of the power strategy.
In blue states, SEIU will go with the Hospital Association or the Nursing Homes Association to the state capital and lobby together for higher reimbursement rates from the Medicaid program. While there is a significant history of not-for-profit and even public nursing homes, about 70 percent are for-profit. They are increasingly amalgamated into larger chains, often owned by private equity or Real Estate Investment Trusts. The basic way nursing homes generate cashflow—two out of every three dollars it earns—is through Medicaid. That subsidy to demand can attract what are actually parasitic financial elements into the industry through the providers.
The company Manor Care, for example, had 25,000 beds and was the second-largest nursing home chain in the country by 2017. In 2011, it was bought by the private equity firm the Carlyle Group, which sold the land on which the nursing homes sat to a company that specializes in being a landlord to healthcare providers. Previously to this, the nursing homes typically owned land. Carlyle could basically pocket the proceeds from that land sale, paying off the debt that it had incurred to acquire Manor Care in the first place. This has become relatively more common in this sector. Manor Care now has to pay rent using its Medicaid revenues, and Carlyle extracts profit.
With a new rent burden, Manor Care’s margins contracted. To protect them, the Carlyle-owned operator found cost savings elsewhere in its business, which for a nursing home without real estate is basically labor. The quality of care in the homes went into a downward spiral. Carlyle claimed that this was the fault of a reimbursement change policy in Medicare, which is basically not true. Past a certain point with management, there is a pattern of death spiral for nursing homes. You can really measure this: regional lawsuit clusters over neglect and abuse. Manor Care is one of them and it eventually goes bankrupt by 2018.
In this case, the private finance attracted by this subsidy of demand actually is parasitic. Because the core issue in long-term care is staffing, the quality of the service depends on whether the operator can profit at existing wages and staff-patient ratios, or whether it has to reduce these costs to protect its margins. A badly run nursing home might have dozens of patients to one Certified Nursing Assistant—a state license that can be earned in four to twelve weeks or less.
The low wages and poor conditions have led to a staff shortage, and state intervention has thus far been regulations on staffing ratios. It’s hard for nursing homes to comply with regulatory standards of patient-staff ratios without increasing their wages to the point that they’re not yielding the profits that are demanded. Now, the federal government has tried to enforce a regulation with more fines and penalties if facilities don’t comply. Several lawsuits have emerged to get this regulation thrown out under the new post Chevron-deference rule.
ae: The same coalition that labor and employer associations form to win the subsidy to demand breaks apart over regulatory issues, and then labor and the employer associations end up on conflicting sides of the very thing that they’ve helped to grow together.
gw: There’s another version of this with hospital market regulation, which has been a kind of intense site of antitrust activity at both state and federal levels since the post-Obamacare wave of mergers. As California attorney general, Harris had a relatively active record of antitrust regulation of hospitals’ merger and acquisition activity. As governor, Tim Walz stuck his neck out against a hospital merger and got slapped on the wrist for it by the Mayo Clinic, which threatened to pull out of Minnesota. He retreated—you do get capital strike in this industry, potentially.
Care and the national economy
ae: Commercial interests shape the fiscal policy that subsidizes demand in these care services. But while the issue seems to be often reported about flatly in newsmedia as the politics of “social policy” or “social spending,” this can, I think, obscure what’s happening. We’ve talked about how commercial interests work inside the care economy, but what about the wider world of employer interests in the American economy—the owner associations in retail, leisure, hospitality, “business services,” real estate, finance, and even manufacturing. How do these shape the care economy in the United States?
gw: Historically, the rest of the economy had an interest in a functional care economy without an inbuilt inflationary dynamic. Employers in other sectors often historically have wound up footing the bill for at least a significant part of the cost of the care economy through health insurance and wage demands related to childcare, etc. In theory, there’s supposed to be a mechanism by which the labor market transfers the costs of the care economy back across the rest of the economy.
That seems not to happen anymore. On the one hand, workers and unions aren’t strong enough to enforce this mechanism. On the other hand, historically, industrial employers sometimes played a somewhat constructive role in relation to health policy, because they were interested in lower costs. I don’t think there’s a clear version of that anymore. You might think that the bosses of America would support Medicare for All to offload this cost from them, but the truth is that they’ve already transferred more and more of the cost of care to their employees, by increasing employee contributions in group plans. Or they have grown to rely on low-wage labor markets where employer-sponsored group insurance is not the norm, such as was true in the retail industry before the Affordable Care Act, or in many small businesses.
ae: Much of the workforce can’t afford those costs. So while there used to be a politics of cost shifting, it seems that as demand for care has grown the question has become not who should pay but whether it should be provided at all on any but individual terms.
Could we think about the emergence of the care economy in the twentieth century—the invention of social insurance schemes, these subsidies to demand that later came to grow, these various phases of social reproduction that demand different services—how can we think about these in relation to the way that national governments conceive of economic development?
The discourse around growth strategies, “varieties of capitalism” or the “product cycle” concept, give some vocabulary to talk about this. The idea is that, to be a prestigious nation in the world of nations, you need to foster your high-technology industries, your entrepreneurs, your research and development capabilities, and your high value-added businesses, to stay ahead in the global race. Otherwise, developing countries will catch up. The focus of economic growth is in these high-tech sectors, which in the North Atlantic and in parts of East Asia have a strong identity as “private sector” industries: this is the CHIPS and Science Act and the energy stuff in the Bipartisan Infrastructure Law and the Inflation Reduction Act—the political campaign of “green capital.”
Though it seems to be almost completely absent from the international politics of growth and development, the fact of the tremendous and unceasing growth of the care economy arguably contradicts a lot of the economic-development logic we read about guiding our national political systems.
gw: The care sector is not as relevant to things like balance of payments or geopolitics. The geopolitical, the geoeconomic—these are the factors that endow the high-value-add sectors with the prestige that you alluded to.
There’s a historic connection in the mid-twentieth century between productivity growth and manufacturing and the possibility of a more egalitarian labor market and social structure. Bidenomics was meant to revive that linkage, in combination with these geoeconomic-geopolitical questions.
In practice, however, manufacturing doesn’t employ enough people to link productivity to a more egalitarian social structure. It is not scalable. Its productivity development has outpaced the possibility of making good on the link between productivity and employment. The result is that manufacturing has these geoeconomic and geopolitical valances, but it can’t do the domestic social work that’s wanted from it. In its place instead stands the care economy, which rather than promoting productivity would in fact demand a cross subsidy from the more economically dynamic parts of the economy. Now, the overwhelming majority of the domestic labor market—which is outside of the shrinking manufacturing sector—must figure out how to pay for and organize its own reproduction.
Now developing payment structures that, in effect, subsidize low-productivity public care from the high-productivity sectors’ profits is a perfectly fine thing, and that’s what we should try to achieve. But we need to rationalize the care economy so that it’s not a site of all these dysfunctions and pathologies we’ve been talking about, and actually a site of human well-being and good employment. The success of this project depends on the degree of redistribution. And that would be socialism, there’s just that there’s no other way to describe it.
ae: Meaning public ownership in addition to public subsidy, as with public school districts, rather than the public subsidies to private providers that characterizes how our care sector has grown over the last generation?
gw: Yes. Not just ownership but democratic control of providers.
ae: You could say that ensuring the expiration of the Trump Tax Cuts and Jobs Act and the accompanying increase in corporate taxes would fund a downpayment on expanding public ownership and increasing reimbursement rates to private providers in care industries. That could have been a way for Kamala Harris to campaign on the care economy issue—although she’s not saying that and hardly seems to want to engage on questions about K-12 education and healthcare economics.
gw: What Kamala Harris wants to do is not socialism, obviously. It’s a gesture in this direction of recognizing the increasing social and economic importance of care mediated by the subsidy of demand. But I think it’s likely to encounter a new set of limits, which arise ultimately from the fact that the supply is still private and predominantly, effectively for-profit.
Demand then becomes a kind of bottomless pit, because we have no means of collectivizing supply as we would need to do to plan to meet people’s needs. Supply needs to be coordinated publicly and democratically. But instead, we rely on public subsidy of demand and coordination of supply through market mechanisms. And that’s in a positive case, with Democratic Party policy victories; in other words, we wind up kicking the can down the road. In this event, the problem will continue to reappear in the form of classic questions of taxation, immigration, and labor, as the dissatisfactions and inadequacies of market coordination get politicized. Public control of supply might not solve it all, but it becomes at least a site of a more constructive politics.
World
