The Takeover of Social Policy by Financialization investigates how finance has surfaced in Brazil out of the social developmentalist policy package applied by the Partido dos Trabalhadores (Workers’ Party, PT) under the presidencies of Luiz Inácio ‘Lula’ da Silva and Dilma Rousseff. The book explains how the incorporation of new social groups into the mass consumption market is not the result of structural changes in the economy but mainly the outcome of the ‘financial inclusion’ of these groups. It is true that consumption in Brazil has been sustained by improvements in employment and wages, but high-cost borrowing, growing indebtedness levels for households and the collateralisation of social benefits have also played their part. In contrast to the increase in private consumption, public welfare provision has deteriorated and the commodification of health care, education and other services has widened.
In the case of Brazil, financialisation is not only a matter of the astronomical cost of the public debt, which directs part of the nation's wealth into the hands of financial and economic elites. Financialisation is also related to the expansion of social benefits tied to loans and to interest-bearing money, and therefore away from the promotion of collective welfare. With these arguments, Lena Lavinas challenges the best-known opinions about recent Brazilian history. The fall in poverty and the increase in employment were neither the result of a virtuous process of simultaneous convergence in the social domain and the productive sphere nor a sustainable redistributive process.
As Lena Lavinas points out, the ‘securitisation’ of social policy is a tendency that can be identified in almost all welfare state regimes. But it has not been incorporated into the Latin American debate on social policy, which is mainly focused on the fiscal space and on the spread of conditional cash transfers. She highlights how, in recent years, the financialisation process came to include those previously excluded and how social benefits paid by conditional cash transfer programmes are used as collateral.
Her critique of what is named the Brazilian ‘social developmentalism’ in force during the PT's governments points out the blinkered focus on the multiplier effects of the rising degree of monetisation of families. Lavinas stresses the way in which the expansion of aggregate demand has broadened the process of commodification and financialisation of social policies and strengthened the private bent of the social protection system in Brazil. As a result, social policy has been retooled to capture the poor, the vulnerable and the lower working class.
In practice, consumer credit is meant to bridge the gap between demand and market supply to foment consumption and to ensure well-being through re-commodification. While the level of household indebtedness in Brazil has sharply increased, nominal interest rates remain extremely costly, especially for consumer goods. In contrast, the social security system has unravelled and its decay has been exacerbated over time, especially since 2012, with the massive tax exemptions given to payroll across many economic sectors. This and other compensations in the form of tax expenses have grown, worsening even further the regressive profile of the tax system.
The uniqueness of Lavinas’ analysis lies in showing how social policy was used to underwrite a financial inclusion model that sowed the seeds of its own demise. While it enabled the incorporation of millions of households into the consumer market, it also deepened the indebtedness of low-income families, partially transforming social insurance and welfare benefits into financial rents. Worries about this debt have increased under the fiscal adjustment of the current Temer administration, with a sharp rise in interest rates and cuts in rights to social welfare.
In summary, the book provides many elements for understanding recent economic, political and social processes in Brazil. First, it examines ‘the social developmentalist’ polices applied during the PT governments and which were the real source of the mass consumption increases. It examines the complementarity between social and economic policy in what was officially called a ‘covenant for growth with social inclusion’; however, for Lavinas, a more appropriate description of this process is a ‘covenant for growth with mass consumption’ (p. 5).
Second, Lavinas claims that social policy has played a crucial role in advancing financialisation and reducing the scope of rights and entitlements. Policies under the PT's administration did not provide public goods and services which would in turn ward off a wide range of social risks and enhance competitiveness, fostering a more homogeneous society. Rather, in Brazil social policy served as collateral to access financial markets through credit, facilitating an intense process of financial inclusion. As such, it has supported debt-financed spending at the expense of the provision of public goods and services.
Third, it addresses the fundamental limitations of the use of social policy as collateral for access to the financial sector. In so doing, it allows the financial institutions to trade collateralised loans on the financial market, amplifying securitisation and deepening household dependence on new and permanent loans. In this way, the logic of social protection was overturned: instead of guaranteeing security against periods of economic volatility, the financialisation of social policy deepened the scope and impact of cyclical trends. In addition, the book explains how public provision (education and health care) is being supplanted by private services, mostly provided through insurance (health care) and loans (college education).
In brief, The Takeover of Social Policy by Financialization is indispensable for understanding the Brazilian paradox after more than 13 years of administrations under the PT. Behind the short-term improvements in some social indicators, there have still been many setbacks in terms of the preservation and consolidation of the social protection system. The official rhetoric praising the impact of social and economic policies aimed to fight poverty obscures the advance of the commodification of health services, care and education via private provision and the accelerated growth of private fully funded pension systems, stimulated by income tax breaks. In practice this does not promote a more homogenous and cohesive society. Instead, families sink into debt as they contribute to the so-called ‘democratisation’ of modern finance.
