Trade-offs and Choices of Economic Policy in Brazil: The Lula Years and the New Directions toward Development after 2010

Abstract

In the liberal democracies of the western world since the Second World War, there have been a number of examples of politically sensitive moments during which a progressive party came into power and tried to introduce new directions in economic policy. At such times, there has been an escalation of economic and political tension, as the implicit or explicit promises in the political discourse and in the government plans have been interpreted as urgent welfare improvements by the lower classes and as threats of wealth confiscation, or at least lower income, by the upper and middle classes. Often, these ambitious programs of economic reformism could not be sustained. In France, for instance, the first term of the socialist Mitterrand government, which began in 1981, took a sudden turn toward austerity in 1983. The record of the current president of the United States, Barack Obama, who began his government in 2009 in the midst of a severe economic crisis, provides another example of economic difficulties and political tensions faced by reform- minded administrations. When Lula won his first presidential election in Brazil, in 2002, a remarkable moment of political and economic tension was also reached. The demographic and economic weight of Brazil, as well as its problems of social and regional inequalities, contributed to increased uncertainty about the policy changes that could be implemented.KeywordsInterest RateGross Domestic ProductMonetary PolicyIncome DistributionInflation RateThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.