Why It’s So Hard for Most Countries to be Economically Independent from the West

By Justin Podur, a Toronto-based writer who teaches at York University in the Faculty of Environmental Studies. His site is podur.org. Follow him on Twitter: @justinpodur. Produced by by Globetrotter, a project of the Independent Media Institute.

Why is it so difficult even for huge countries with large, diversified economies to maintain independence from the West?

If anyone could have done it, it was Brazil. In the 19th century it was imagined that Brazil could be a Colossus of the South to match the U.S., the Colossus of the North. It never panned out that way.

And 100 years later, it still hasn’t happened. With a $2 trillion GDP (a respectable $9,800 per capita), nearly 200 million people, and a strong manufacturing base (the second largest in the Americas and 28.5 percent of its GDP), Brazil is far from a tiny, weak island or peninsula dependent on a patron state to keep it afloat.

When Luiz Inacio “Lula” da Silva won a historic election to become president of Brazil in 2003, it seemed like an irreversible change in the country’s politics. Even though Lula’s Workers’ Party was accused of being communists who wanted to redistribute all of the country’s concentrated wealth, the party’s redistributive politics were in fact modest—a program to eradicate hunger in Brazil called Zero Hunger, a family-based welfare program called the Family Allowance, and an infrastructure spending program to try to create jobs. But its politics of national sovereignty were ambitious.

It was under Workers’ Party rule (under Lula and his successor, president Dilma Rousseff, who won the 2010 election to become president at the beginning of 2011) that the idea surged of a powerful BRICS (Brazil, Russia, India, China, South Africa) alliance that could challenge the ambitions of the U.S.-led West. Brazil took steps to strengthen its manufacturing, and held its ground on preventing pharmaceutical patent monopolies. Lula’s Brazil accused Western countries of hypocrisy for insisting both on “free trade” with poor countries and farm subsidies for themselves. Brazil even moved in the direction of building an independent arms industry.

Contradictions remained: The Workers’ Party government sent Brazilian troops to command the UN force that enacted the U.S.-impelled occupation of Haiti—treating the world to the spectacle of the biggest, wealthiest country in the region helping the U.S. destroy the sovereignty of the poorest as part of its foreign policy. But in those years Brazil refused to renounce its alliance with Venezuela’s even more independent-minded government under Hugo Chavez; it defended ideas of South-South cooperation, especially within Latin America, and it made space for movements like the Landless Peasants’ Movement (MST).

But after more than a decade of Workers’ Party rule, what happened? President Rousseff was overthrown in a coup in 2016. When polls showed that Lula would have won the post-coup election, he was imprisoned to prevent him from running. And so with the Workers’ Party neutralized, Brazil elected Jair Bolsonaro, a man who famously saluted the American flag and chanted “USA” while on campaign (imagine an American leader saluting the Brazilian flag during a presidential campaign). No doubt the coup and the imprisonment of Lula were the key to Bolsonaro’s rise, and failings like supporting the coup in Haiti played a role in weakening the pro-independence coalition.

But what about the economy? Or Brazil’s leaders now dragging the economy into the U.S. fold? Or did the Brazilian economy drag the country back into the fold?

Brazil’s economic history and geography have made independence a challenge. Colonial-era elites were interested in using slave labor to produce sugar and export as much of it as possible: The infrastructure of the country was built for commodity extraction. Internal connections, including roads between Brazil’s major cities, have been built only slowly and recently. The various schemes of the left-wing governments of the last decade for South-South economic integration were attempting to turn this huge ship around (not for the first time—there have been previous attempts and previous U.S.-backed coups in Brazil), and to develop the internal market and nurture domestic industries (and those of Brazil’s Latin neighbors).

Yesterday’s dependent economy was based on sugar export—today’s is based on mining extraction. When Bolsonaro was elected, the Canadian Broadcasting Corporation quickly posted a story speculating on how the new government would be good for Canadian mining companies. The new Brazilian president plans to cut down huge swaths of the Amazon rainforest. Brazil is to return to its traditional role of providing natural resources to the U.S. and to the other rich countries.

A smaller country with a stronger pro-independence leadership, Venezuela faced similar structural economic problems that have imperiled and nearly derailed the independent-minded late president Hugo Chavez’s dream that Venezuelans would learn to eat arepas instead of hamburgers and play with Simon Bolivar dolls instead of Superman ones. There, too, the pro-independence project had a long-term goal of overcoming the country’s dependence on a single finite commodity (oil), diversifying its agricultural base and internal markets. And there, too, the challenge of doing so proved too great for the moment, especially in the face of an elite at least as ruthless as Brazil’s and nearly two decades of vindictive, pro regime-change U.S. policy. Today Venezuela’s “Bolivarian project” is in crisis, along with its economy and political system.

There are other sleeping giants that remain asleep, perhaps for economic reasons. In the face of relentless insults by Trump, the Mexican electorate chose a left-wing government (Mexicans have elected left-wing governments many times in the past few decades, but elections have been stolen). But locked into NAFTA, dependent on the U.S. market, Mexico also would seem to have little option but to swallow Trump’s malevolence.

Egypt is the Brazil of the Middle East. With 100 million people and a GDP of $1.4 trillion, the country that was for a few thousand years the center of civilization attempted in the 20th century to claim what is arguably its rightful place at the center of the Arab world. But today, this giant and former leader of the nonaligned movement is helping Israel and the U.S. starve and besiege the Palestinians in Gaza and helping Saudi Arabia and the U.S. starve and blockade the people of Yemen.

Egypt stopped challenging the U.S. in the 1970s after a peace deal brought it into the fold for good. Exhaustion from two wars with Israel were cited as the main cause—though a proxy war with Saudi Arabia in Yemen and several domestic factors also played a role. But here, too, is there a hidden economic story?

Egypt has oil, but its production is small—on the order of 650,000 barrels a day compared to Saudi Arabia’s 10 million barrels, or the UAE’s 2.9 million. It has a big tourist industry that brings in important foreign exchange. But for those who might dream of an independent Egypt, the country’s biggest problem is its agricultural sector: It produces millions of tons of wheat and corn, but less than half of what it needs. As told in the classic book Merchants of Grain, the politics of U.S. grain companies have quietly helped feed its power politics all over the world. Most of Egypt’s imported grain comes from the U.S. As climate change and desertification wreak havoc on the dry agricultural ecosystems of the planet, Egypt’s grain dependence is likely to get worse.

The structures of the global economy present challenges to any country or political party that wants to try to break out of U.S. hegemony. Even for countries as big and with as much potential as Brazil or Egypt, countries that have experienced waves of relative independence, the inertia of these economic structures helps send them back into old patterns of extraction and debt. In this moment of right-wing resurgence it is hard to imagine political movements arising with plans to push off the weight of the economic past. But that weight cannot be ignored.

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62 comments

  1. TG

    So Egypt has a massive and rapidly growing population, but relatively little arable land, and so is dependent on food imports.

    Duh.

    Perhaps the problem is not Western grain merchants. Perhaps the problem is when a country that could comfortably feed 20 million people boosts its population to 100 million and beyond, that more people do NOT automatically create more wealth. I mean, that is an established fact: more Egyptians are certainly creating more demand for food, but they are not automatically and without delay creating more fresh water, or new industries, etc.

    Reply
  2. Wukchumni

    I’d always wondered why in the aftermath of WW2, when most of the developed world was in tatters, why South America didn’t arise to become more than the continual basket case of a place that it is?

    Every country there has had hyperinflation (Brazil had a decade long+ stretch of it) episodes-post WW2, but surprisingly none before the war…

    Reply
    1. PlutoniumKun

      I think the answer for South America is structural to its politics and society. Both were settled by Europeans from feudal societies and incorporated all the worst aspects of a decaying Spain and Portugal into their systems. They are not just dependent on resource extraction, they are dominated by elites who’s sole source of power is that resource extraction. In Classical economics terms, they are dominated by rentiers, not industrial capitalists. In modern development economics, you would say their structural issues prevent them escaping the middle income trap. When you look at reactionary movements in Brazil or Argentina, its usually big ranchers and mining interests who are behind them. The urban middle classes are usually not strong enough to form a buffer – as historically has happened in Europe and the US and most other countries that have achieved high development status.

      Some might argue that a major contributor to the problem is simple geography. South American has a largely impenetrable interior, encouraging an urban and infrastructural system based on connecting agricultural and mining areas to big coastal cities, who’s wealth is then dependent on trading those goods across the ocean. When you compare North American or Europe or even China to South America, you can see the former countries have dense internal networks of rail/road and many similar sized cities. South American has a few mega cities and very undeveloped internal networks. Of course, there is a chicken and egg argument here – did geography lead to a rentier dominated society, or did a rentier society result in an undeveloped urban structure and infrastructure?

      Reply
      1. JohnnyGL

        Re: “why South America didn’t arise to become more than the continual basket case of a place that it is?”
        and
        “I think the answer for South America is structural to its politics and society.”

        I think this is a bit too broad-brushed and leaves out a lot of the more interesting parts of the story. Brazil and (even Mexico) among other countries in the region were progressing fairly nicely up until and even through the 1970s.

        Paul Volcker’s interest rate hikes and the OPEC oil price hikes did them in, sucking out a lot of capital and forcing a debt crisis (solved by Brady bonds).

        After those episodes, Wall Street and the neoliberal Chicago boys got their hooks into them, bought off their elites and got most of the commanding heights of the economies of the region privatized or at least run on neo-liberal terms.

        There have been mixed attempts at regional unity like Mercosur, but I also think that things like the drug war have been used to shore up alliances with Colombia and Mexico, and various financial crises that result from open capital accounts have whacked any outliers back into line.

        It’s also worth pointing out that the global context has changed to encourage S. American countries to become commodity producers. China’s rise in the last 2 decades has pushed a kind of ‘dutch disease’ on them.

        Reply
    2. Yves Smith Post author

      Brazil did not have hyperinflation. It had very high inflation and managed it better than anyone. Widely acknowledged to have the best inflation accounting in the world. One of the reasons inflation is so damaging to business is that the different line items inflate at different rates, so its owners/executives are left not confident about how much money they are making in real terms, which makes them loath to invest. Good inflation accounting alleviates that problem somewhat.

      Reply
      1. Wukchumni

        I’d call this hyperinflation, yes indeedy.

        Changing the name of your currency 2x in the space of a decade, and making each of them worth 1/1000th as much as the next incarnation, is pretty awful.

        Think about it, lets say we have U.S. Dollars, and then we go to the Buck, and it takes 1,000 Dollars to make 1 Buck, and then we go to the Samollian, of which it takes 1,000 Bucks to equal 1 Samollian.

        What would you call that other hyperinflation, i’m all ears?

        In 1967, Brazil introduced the cruzeiro novo (the word “novo”, “new” in Portuguese, only appearing on the provisional issue of banknotes), with 1 cruzeiro novo equal to 1000 “old” cruzeiros. It had the ISO 4217 code BRB. In 1986, the country switched to the cruzado, worth 1000 cruzeiros (novos).

        In 1990, Brazil switched back to using the name cruzeiro for its currency. The cruzeiro replaced the cruzado novo at par. It had the ISO 4217 code BRE. This third cruzeiro was used until 1993, when it was replaced by the cruzeiro real at a rate of 1 cruzeiro real = 1000 cruzeiros.

        https://en.wikipedia.org/wiki/Brazilian_cruzeiro

        Reply
        1. MyLessThanPrimeBeef

          To calculation inflation rates in that case, we would need to know how much one cruzeiro bought in 1966, how much one cruzeiro novo bought in 1967, how much one cruzado bought in 1986, how much cruzeiro bought in 1990, and how much cruzeiro real buys today.

          Reply
          1. Wukchumni

            The Cruzeiro Novo was worth around 25 cents U.S., a Cruzado was also worth about 25 cents, and a current Real is worth 26 cents.

            See where this is going, anybody that had any savings in Brazil, was completely screwed.

            Reply
            1. José

              Not so. Savers in Brazil have made very good returns because nominal interest rates have been way higher than inflation since the introduction of the Real.

              Reply
                1. José

                  a current Real is worth 26 cents

                  Right: the Real started on July 1st, 1994 at a 1:1 parity to the US dollar.

                  But a US investor who had exchanged one dollar for one real on that day and placed that one real at the domestic risk-free overnight interest rate until now would have exactly 53.46 reais today (source: online calculator on the central bank website).

                  That translates to 13.7 dollars at today’s exchange rate.

                  Or an annualized return in dollars of about 11.3%.

                  That’s hard to beat. The dollar may be the world’s reserve currency but that hypothetical US investor would have been well advised to eschew the dollar for the real during the last 24 and a half years.

                  Reply
                  1. Wukchumni

                    Yeah, big wahooza.

                    What about the mythical American investor that put it all into Cruzeiro Novo’s in the 1980’s and now has nothing?

                    Reply
                    1. NotReallyHere

                      He wouldn’t have nothing he would still be very well off. If the mythical American investor put his US$into the Cruzeiro in the 1960’s and held it in cash it would indeed, be worth nothing. If however he placed it in interest bearing assets (e.g. government notes), he would be extremely well off today because Brazil’s interest rates were always above inflation (regardless of what the hyper-inflation number was).

                      Brazil’s hyper-inflation was the longest period of hyper-inflation in human history and it was hyper-inflation. BUT it was never meant to hurt savers. The system’s de-leveraging was done on the backs of the poor (those without savings and those working in the informal sector) and this fact was hidden by massive amounts of monetary delusion (index manipulation mainly)

                      When President Collor tried to confiscate savings in 1992, it marked the first time any politician dared to attack savers/the banks and he ended up in jail, ostensibly for campaign finance infractions, but in reality because he hurt savers and the banks. Just to be clear Collor was extremely corrupt, but that alone does not disqualify anyone from office in Brazil (or anywehere else as far as I can see). We saw that with Pres Temer.

                      I have to say, I followed the headline into this story and was surprised to see the main topic was Latin America. Latin America is part of the west, both geographically and culturally. Why would they want to break from it?

                    2. José

                      The Plano Real inaugurated the neoliberal/globalization era in Brazil – even the PT governments endorsed the essential tenets of that plan. So it seems unlikely that the country will revert to the previous high inflation period; it now does “feel” as if it were ages ago.

                      But even during the years of hyperinflation investors made gains in real terms. A quick search on the central bank website shows that from
                      1987 to 1994 inflation was about 45,400 (followed by six zeros) percent whereas return at the risk free rate for the same period was a much higher 81,700 (again, with six zero digits to the right) percent.

                      As Yves pointed out the Brazilian economy – and especially its financial sector – adapted very efficiently to inflation. In real terms the recent recession was much worse for the average citizen that saw its real income shrink by some 7 to 8% (it recovered recently but it’s still almost 5% down when compared to 2014). That kind of severe and prolonged contraction simply never happened in the years of high inflation.

              1. NotReallHere

                “The Plano Real inaugurated the neoliberal/globalization era in Brazil ”
                I don’t agree. the neo-liberal era was in full swing from the 1970’s in line with the rest of the West. Brazil had a party in the era of negative real interest rates, but when Volker raised rates and the 1982 Latin American bank defaults began, the domestic agenda was to save the banks (and hyper inflation did just that by making the poor pay). In that sense no adjustment was needed.

                Reply
                1. NotRealyHere

                  https://www.indexmundi.com/facts/indicators/SI.POV.GINI/compare?country=br

                  Look at this chart of Brazil’s GNI index. Already shameful in the early 1980’s it deteriorated (headed towards 100) in the first years of hyper-inflation and then improved under Collor (confiscation of savings) but deteriorated again in the 1992 to 1994 period (the lead up to the Plano Real).

                  It was only in the period from 2002 onward that we saw any meaningful, sustained improvement in the GNI index and that, I believe was because of the introduction of the Bolsa Familia (a very minimal level welfare by European or US standards).

                  Reply
                2. José

                  Brazil’s economy had a very large Federal and State sector until the wave of privatizations introduced after the Plano Real. In that sense the neoliberal era started in 1994.

                  But even now some elements of the pre-1994 period remain in place. There are still some very important public sector companies (the newly elected president – as well as some state governors – is planning to privatize some of them but it remains to be seen how far he will go in the end). There is a national development bank, a national health service (sadly non existent in the far wealthier USA) and many other features uncommon in other countries of Latin America.

                  So in a sense the neoliberal system of Brazil retains some features somewhat reminiscent of social democracy. The big question now is how far they’ll be reconfigured or dismantled by the government whose mandate starts next January.

                  Reply
            2. JTMcPhee

              Some discussion on inflation as one of the challenges the mopes of Brazil are saddled with (along with colonial history and rentiers and looting and external neoliberal assaults and all the different types of corruption): “Why is inflation so high and volatile in Brazil? A primer
              ”. https://www.bis.org/publ/bppdf/bispap89f.pdf

              Maybe going to gold could save them, if only they would see…

              Reply
              1. Wukchumni

                Here’s the Argentine variant of what happened in Brazil, again-they thought they’d solve everything by renaming their currency. It didn’t work.

                The peso argentino ($a) (ISO 4217: ARP) replaced the previous currency at a rate of 1 peso argentino to 10,000 pesos ley (1 million pesos m$n). The currency was born just before the return of democracy, on June 1, 1983. However, it rapidly lost its purchasing power and was devalued several times, and was replaced by a new currency called the austral in June 1985.

                The austral (“₳”) (ISO 4217: ARA) replaced the peso argentino at a rate of 1 austral to 1000 pesos (one billion pesos m$n). During the period of circulation of the austral, Argentina suffered from hyperinflation. The last months of President Raul Alfonsín’s period in office in 1989 saw prices move up constantly (200% in July alone), with a consequent fall in the value of the currency. Emergency notes of 10,000, 50,000 and 500,000 australes were issued, and provincial administrations issued their own currency for the first time in decades.

                The current peso (ISO 4217: ARS) replaced the austral at a rate of 1 peso = 10,000 australes (ten trillion pesos m$n). It was also referred to as peso convertible since the international exchange rate was fixed by the Central Bank at 1 peso to 1 U.S. dollar and for every peso convertible circulating, there was a US dollar in the Central Bank’s foreign currency reserves. After the various changes of currency and dropping of zeroes, one peso convertible was equivalent to 10,000,000,000,000 (1013) pesos moneda nacional. However, after the financial crisis of 2001, the fixed exchange rate system was abandoned.

                https://en.wikipedia.org/wiki/Argentine_peso

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              2. José

                Thanks for the link to the very interesting BIS paper written by the deputy governor of the central bank of Brazil – however the last thing Brazil needs is a return to the Gold standard. Inflation now stands at about 4% a year, the real in practice is fully convertible, there is no black market for dollars and the financial account of the Balance of Payments has been liberalized since 1994. The situation in Brazil simply cannot be compared to Venezuela or even Argentina in what concerns a key factor – management of the currency.

                Reply
                1. JTMcPhee

                  I should have added a snark tag to that remark about “going to gold.” It was just a reflex remark addressing the persistent efforts to paint the looted economies, distressed by many ‘factors” both internal and external, as fixable by recourse to the “hyperinflation explanation” and hints that specie is the only true foundation, “Nature’s money,” of the relationships mediated by that still not agreeably defined and understood lake of “money” that we fish (prey and predator” swim in.

                  Reply
    3. WheresOurTeddy

      “I’d always wondered why in the aftermath of WW2, when most of the developed world was in tatters, why South America didn’t arise to become more than the continual basket case of a place that it is?”

      “Open Veins of Latin America – 500 years of the rape of a continent”
      by Eduardo Galeano

      Reply
      1. JTMcPhee

        And “Confessions of an Economic Hit Man,” http://www.resistir.info/livros/john_perkins_confessions_of_an_economic_hit_man.pdf, and the sequel to it, https://issuu.com/ortezlame/docs/textbook__the_new_confessions_of_an

        Naw, it’s all just bad management of currency by governments that TAKE power by economic or military coup. And the absence of that balancing “middle class.” Nothing to do with looting on huge scales over centuries… /s

        And in this envelope, I have the answer to how all that can be undone, fixed, and how there can be a bright future going forward… if we don’t succumb to some Jackpot event(s) first…

        Reply
        1. Wukchumni

          Ecuador was the first South American country to surrender to us in giving up their national currency-the Sucre, in going to the almighty greenback as their currency.

          This happened around the turn of the century, and it could be that it’s our gambit with the other countries in the region, for like Ecuador which is rich in oil and other minerals, all of the sudden everything that ‘matters’ to us, is Dollar-denominated, a key to keeping our hegemony intact, in that the more users of it, and it becomes a given being so used in a widespread manner.

          Venezuela is next on the hit parade of Dollarization…

          Reply
  3. Pym of Nantucket

    Good start but article doesn’t really give explicit answer to its rhetorical question. I’m guessing the short answer is credit. The amazing genius of the US reserve currency policies have given them such massive leverage over the world, it is nearly impossible to recreate elsewhere. This is why China is trying to get loans flowing from their belt/road relationships.

    Without the ability to simply declare into existence wealth, the US would have to compete fairly for their global relationships. What is amazing about this system, is that the right to owe money to the US is something countries will beg for, because there is no alternate trust system that could be used to stimulate economic activity. The global economy is truly in an unusual situation and the completely financialized creation of credit is less than 50 years old as a human experiment. (before it was linked to precious metals, and I think returning to that would squash liquidity).

    I think in the future a different currency will be needed that is anchored to energy in a more direct way than the petrodollar. I think we should trade in kWh.

    Reply
    1. Adam Eran

      Every commodity-backed currency bakes deflation into its economy. It may sound crazy to tie economic performance to the production of gold or silver mines, or, in the case of bitcoin, kWh available to generate its encryption, but that is exactly what it does.

      When currency is a stand-in for a commodity, the suffering of debtors follows inexorably. Mark Blyth says we can either have a gold-backed currency or democracy, not both. (in Austerity: The History of a Dangerous Idea).

      It’s also less-than-optimum to take something that’s really a measurement to be a thing, too. Will we run out of inches?

      There may be a case for limitations to currency issuance, but commodities, including kWh, are the less-than-optimum way to do it.

      Reply
      1. Pym of Nantucket

        Energy, the unit, is not a commodity. For the time being, there is essentially an unlimited amount of it. Deflation comes when a commodity is scarce.

        Reply
  4. PlutoniumKun

    It might be also worth focusing on those countries which have succeeded in keeping some independence, whether small or large. Bhutan is an example of a very small country which has to some extent succeeded in keeping western and other foreign interests at arms length. Of course, its protected from western domination by being landlocked by two regional superpowers. But it has resisted the temptation to play off one against the other. The price has been relative poverty, although its proud of having a very happy (by their own measure) populace. It has though accepted its military dependance on India, in effect ceding its military independence to that country (as was proven in the recent Chinese incursion, the Bhutanese depended on the Indian military to chase the Chinese off).

    Plenty of countries have tried some level of autarky. Ireland tried it after independence – both military neutrality and economic independence. The latter was a disaster, it proved completely impractical and left the country entirely impoverished by the 1950’s. Larger states including of course Russia, India and China have had their experiments. Russia at the moment seems the most successful, something nobody I think would have predicted 10 years ago. India has been largely proud to be apart for decades, but seems determined under Modi to abandon that. In South America, Uruguay is arguably the most successful example of a country that has kept to some degree its own independence. Costa Rica has been successful too, although you can’t really say its kept US influence at bay. In Africa, Botswana is a country which has had some degree of success. In Asia, Laos has tried to keep all influences out, but its pretty much being swallowed up by the Chinese now. This, of course leads us to the other conclusion – if you are small, and you resist Western influence, you may just end up getting swallowed up by another imperial power, be it the Saudi’s (Yemen) or Laos/Tibet/Myanmar (China), etc.

    Reply
    1. Alex

      In what sense Russia is a success story, especially compared to Brazil? Its economy is less diversified and more dependent on a single commodity. And no corrupt politicians have been ousted or jailed

      Reply
      1. Olga

        I think one needs to check the latest data/developments. Russia has a diversified economy. The comment is inaccurate and misleading.

        Reply
        1. Anon

          And Russian society reveres education. An educated populace is wealth. (Americans, in general, think they are well educated—they are not. Our universities have become an extractive industry.)

          Reply
          1. Newton Finn

            And love him or hate him, Russia’s president is a light year ahead of America’s in intelligence, tenacity, and popular support.

            Reply
      2. paulmeli

        Why is acquisition of foreign currency considered the measure of whether a country’s economy is successful or not?

        BTW, Russia is the Worlds largest producer of wheat. They are also on track to become an autarky. This is good for Russian citizens if not for it’s oligarchs.

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      3. PlutoniumKun

        I mean successful in the sense of maintaining economic independance. Despite sanctions its remained relatively stable and is as close to autarky as is reasonably possible to be for a country of its relatively small economic clout. It is far less vulnerable to bullying by the US, China, or anyone else for that matter than any other country in the world.

        Reply
        1. Anon

          A nuclear arsenal, and a demonstrated skill at shooting down missiles will give you lot’s of “leg room” in international affairs.

          Reply
      4. Lee

        Russia and Brazil are both at about $10K per capita GDP. Russia has less economic inequality as measured on the GINI index, at about 40 to Brazil’s 50. The trend in both countries in recent years has been toward a reduction in economic inequality insofar the GINI coefficient may be relied upon as an an indicator. In any event, according to these metrics, the two countries are comparable. But Russia has nukes, is more technically advanced and is geographically more advantageously located on the more prosperous Eurasian continent.

        I’m guessing that if Brazil got paid by the rest of the world for the ecosystem services provided by the Amazon rain forest, it would be doing quite well without having to lift a chainsaw.

        Reply
  5. Watt4Bob

    The New World Order (GHW Bush) has only a couple of rules, and one is you will do ‘business’ only with the western finance Borg.

    And what they mostly mean by ‘business’, is everything you do should be financed by the Borg, the Borg gets a cut of everything you do, or you don’t get to do it.

    It’s not only bad for other countries, it’s bad for the American people because those same finance institutions that screw over other countries, screw Americans over by leading/prompting the rush to off-shore American jobs.

    The same forces that are being applied to Brazil and Venezuela have been, and will continue to be applied to American workers.

    America is not busy spreading democracy, it’s busy extending the reach of Wall $treet’s steely fingers.

    Reply
    1. a different chris

      That is a good summation.

      1) Banks loan to foreign countries
      2) Foreign countries need their citizens to work those loans (or at least believe they will work those loans) off

      And although I am not a believer in “there is only so much work to go around”… it is true that at a give time only so much work can be organized. So if Americans “do the work” then the foreigners are blocked from doing it. If they are blocked then the bankers don’t get paid.

      So the obvious solution is to throw the Americans out of work. The only trick is hiding this mechanism from them, in plain sight if possible.

      Reply
    2. Doug Hillman

      Bingo. Recall John Perkins’ Confessions of an Economic Hitman. The USG is organized crime, engaged in racketeering, extortion and mass-murder. Weak countries that resist domination like Cuba are targeted with sanctions, embargoes, assassins or “humanitarian” wars. Honduras and Venezuela are recent examples, the former now a large source of caravan refugees, gracias a Obama, and the latter’s economy is being made to scream like Chile’s in 1973. BOE has illegally withheld $.5 billion of Venezuela’s gold, and according to Maduro, the CIA has already targeted him for assassination.

      The USG is a brutal lawless mob, and the only independent challenges are likely to come from China and Russia, which is why they are being vilified as aggressors. Russia has now become our enemy #1, without any credible evidence simply because it had the temerity to opposed US ambitions in Suria and Ukraine

      Reply
      1. WheresOurTeddy

        1. Bribe leaders to sell out national interests to Borg.
        Bribe didn’t work?
        2. Coup and/or Assassination.
        Coup failed?
        3. Marines and Airstrikes

        rinse and repeat

        Reply
  6. russell1200

    It is taken for granted here that there was a coup. But the charges of corruption against Lulu stemming from the Operation Car Wash investigations seem pretty real and plausible. The Clintons have their foundation, and Trump has his…”all-sorts-of-stuff” . They are still walking free. Is it a coup because somebody in a high office actually got convicted of something?

    The author does mention the problems with an extraction state. I think that that is at the root of the problem. It also is a result of the general trade pattern set up by the Western Europeans, with others brought in over time. Industrialization-Colonialism I think can fairly be described as root causes. It is also a lot more plausible than claiming the relatively recent introduction of the US $ as a reserve currency as a root versus aggravating cause.

    Since a huge number of countries seem to have had this problem (half of the issue is referred to as the Dutch disease after all), it would be more interesting to compare experience to countries that escaped the problem. My guess is that a close look at the history, and current trends, would show that the problem is actually much deeper rooted and far more problematic than just some hand-wringing over the United States replacing nice guy/gal governments and the US$ reserve currancy.

    Reply
    1. Grebo

      Lula may or may not be corrupt as charged. The politicians who benefited from his incarceration certainly are corrupt, though now they won’t be charged. The ruse used to depose Roussef was bogus, but the corruption investigations had to be derailed somehow and it was the best they could come up with.

      If you are interested in the difference between the Singapores and the Haitis of the world Bad Samaritans by Ha-Joon Chang is a good read.

      Reply
      1. RBHoughton

        Well said Grebo. There is an answer and we already know it. Ha Joon Chang describes it well in that book. Richard Werner adds a more detailed picture – the necessity of breaking the TBTF banks into a thousand pieces and replacing them with small local banks.

        Reply
  7. Summer

    At this point in history, the countries need to find common ground – apart from the common ground that elites in every country share along with their mediocrities.
    This situation persists because other countries don’t trust one another.

    Solidarity could have prevented the divide and rule/conquer that led to the situation they are in and keeps them there.

    Reply
  8. Tim Smyth

    This is a bit of weird argument but one could say up until the 1930-1950s California and the broader Western part of the US were a natural resources colony of the East and Midwest. Whether this is factually correct prominent westerners of that era definitely thought so(like Marriner Eccles, Henry Kaiser and AP Gianini). Yet today no one would think of California as a natural resource colony of the Eastern US. More often than not California calls the shots today in US politics. This was not the case prior to the 1930s.

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    1. Anon

      …because of the Connecticut Compromise, gerrymandering, and the Electoral College the great state of California has marginal consequence on US politics. It’s impact on commerce, agriculture, and environmental leadership is huuge.

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    2. Lee

      East coast swamp dwelling elites’ ignorance of the western environment was so complete when drawing up the Homestead Act that they thought a simple grid of privately owned crop farming plots, that worked well enough because of regular rainfall east of the 100th meridian, would also work west thereof where the rain does not fall mainly on the plain. Hilarity in the form of range, water, timber, gold, and Indian wars ensued. Perhaps the best result of the Homestead Act’s failure to create wall to wall private holdings in the west is that so much of it is now publicly owned.

      Reply
  9. DMX

    Look far east for the issue. It is the rise of east-south Asian (with China in the center) manufacture and supply chain network that wreak havoc in those places.

    Reply
  10. lyman alpha blob

    I understand that the focus of the article is economics, but the author does neglect to mention the carpet bombing, or threat thereof, that the West, and especially Uncle Sugar, is so fond of.

    That has a lot to do with it.

    Reply
  11. JohnnyGL

    I think this post is valuable, in so far as it goes (which isn’t too in depth). But it’s asking excellent questions and I think it’s worth tying in things like MMT to think about sovereignty more broadly. The US has more than it appreciates….and a lot of other countries run into problems with external constraints

    Stanley Dundee, above, references John Perkins’ “economic hit men” which explains the mechanisms of how elites get bought off and co-opted in various countries. This Ian Welsh piece is one of my favorites and I think gets at the same ideas: https://www.ianwelsh.net/free-trade-is-elties-betraying-their-own-populations/

    Argentina isn’t referenced here, but I think the fall of the Kirchners could be lumped in with Brazil as a country that ‘seemed’ to be gaining (forced into) sovereignty and then decided to climb back into US orbit. I think both stories, that of Brazil and Argentina, are worth digging into.

    The Kirchners made mistakes, as did the Workers Party and they both had a lot of successes, too. But it’s worth asking why the opposition to them changed so little. Thatcher famously pointed to Labor Party changes (Tony Blair, specifically) as the clearest evidence that she’d had a lasting effect on British politics. Kirchners Peronists and Workers Party can’t point to having done that nearly as much as Thatcher did.

    Reply
  12. Whip

    Did anyone else notice the huge disconnect in this article? It mentioned a coup, and then it went to speculate on other structural economic factors influencing Brazil’s independence. How about asking, “Why did the coup happen?” or “What forces were behind the coup?” or “Were the political decisions of the coup leaders significant enough to override many significant economic and social forces that would have lead to greater independence?”

    If the coup leaders and any international backers wanted dependence, they’ll get dependence regardless of any other ‘structural’ factors. I mean, the new president post-coup chants the name of the dominant western country, USA, the same one that loves forcing dependence on other countries to take advantage of them. How did the authors not acknowledge this as the dominant factor?

    Reply
    1. johnnygl

      I think you’re asking important questions, but coups can’t succeed (at least not for long) without the structural/institutional/class forces lined up behind them. Coup attempts failed in venezuela in 2002, and in turkey in 2016.

      Certainly, key players in Brazil, like Sergio Moro have been able to work the levers of power at important inflection points, but people like him have a base of support.

      Haddad ran a questionable campaign, selling himself as lula’s proxy. Bolsonaro WAY exceeded his poll numbers. Yes, brazil is a very sexist and racist society, but you don’t get the swing towards him without looking at the trauma brazilian society has faced in the last decade. The economy has been smashed, crime is absolutely phenomenal. It’s almost hard to overstate. People seem very desperate for someone offering something different. The main centrist parties got crushed and PT, actually held its base and barely lost any seats in congress.

      So, if there was a coup, and i’d agree there was, it seems to have rebounded on the parties and their leaders that organized and launched it. This situation is/has been much more dynamic and complex than outsiders may realize.

      Reply
  13. charles 2

    It goes like this :
    1) Size brings extra productivity and wealth per capita (comparative advantage between different regions, more people bringing more “genius outliers” who bring major innovations, etc…)
    2) Restricting size (which is what being independent from the rest is about) therefore implies frugality from the country that seeks to be independent.
    3A) If frugality is not endorsed by the society elites : FAIL, as they will push for integration with the rest of the world
    3B) If frugality is to endorsed by the rest of society : FAIL, this is especially true when they have tasted the benefits of economic integration (this is for instance why so many people still want the EU to be there)
    4) Small size * frugal economy = little resources to devote to the military.
    5) For bigger countries, seeing other smaller countries being independent, and yet having significant resources, implies frugality for such bigger country
    6) 4 and 5 together means that there is a great incentive from bigger countries to be imperialist, because they should prevail militarily. In such case : FAIL again !

    Bottom line, if a “smaller” zone wants to succeed at economic independence from the “global” zone:
    A) It should tailor its frugality to a level commensurate with its internal resources
    B) It must have an effective “weak to strong” dissuasion strategy, consistent with the economic output implied by A (Note that Nuclear technology is a big equaliser here because it provides a quite effective “weak to strong” dissuasion strategy indeed for quite cheap , and, for any country with sea access, there are tremendous energy resource accessible. No wonder that the West is all in for Nuclear non proliferation !)
    C) It must deny as much as possible the benefit of larger population in knowledge creation. (practically by promoting vigorously high level education and having large organisations dedicated to industrial spying).

    China, Russia and India are the only zones to make a decent attempt at B and C, and in my opinion, have yet to solve A, whether it is on the elite side or the popular side. Most Europeans still don’t get that they need B, so Europe can’t be independent. UK and France have something close to B, but are reluctant to do C at the scale that is needed, and doing A is totally out of reach in their current political situation. Japan has the cultural strength to save A in my opinion, can do B if they want to, but will struggle to do C because they are so few “cosmopolitan” Japanese persons.

    Reply
  14. eg

    Economic Independence requires capital controls.

    Unfortunately, these bring the hegemon’s gunboats, and goodbye independence of any kind.

    Reply
  15. rob

    I think the question of leadership cannot be over emphasized.
    as far as american influence,look at all the countries whose course we perverted in the name of our “cold war”.. There were so many it would take a small book to go into the years and people and plans we did away with. Look at south america, by 1948, we were causing instability and take overs of some really progressive people who could have really set their respective countries on a totally different path. Never mind the actual coups like in guatemala in 54 for chichita banana,or chile in 73; for pepsi and annnaconda copper.or the total assault like in nicaragua,elsalvador, honduras, in the eighties, by the ghw bush clan ,or people like noriega, also a part of the ghw bush clan.
    Or hell, since we had cornelius Vanderbilt and the robber barrons in south america taking over their gov’ts since the 1880’s and eventually the panama canal zone.. ….. where haven’t “we” screwed the pooch…. Since the days of colonial invasion and slave trade days when the “west” originally “took over”….
    Right up through the 2004 coup in venuzuela, or the opec aided collapse of the economies in the past few years…. … hell this is a run on idea…..
    but wait, what about the rest of the world…. o wait, you mean in the cold war when we ransacked everyone across the globe we could, who wasn’t already a soviet satellite, and who had resources our corporations were using to fuel their profits.
    A tyrant who is stealing a countries weatlh, is only there if he is selling it to a bigger fish.. and guess who that is…..Someone has to be paying, for a corrupt official to be selling.
    Then there is britian. the global empire, that really started the corruption. The british empire was a corporate empire. Their companies, owned the world, and their army protected the companies, property. Over the last two hundred years, the world grew organically, out of this medium. The other colonial powers, were also “in the game”, the game was run by the west, the leaders were educated in the west…. so why is there any question as to why the world is “stuck” in the grip of “the west” At the turn of the 20th century, one family, cousins and kin were arthur balfour, lord rosebury,Leaders of :canada,austrailia, ireland,south africa, india,etc. . And now the city of london, excels in the worlds hidden monies.. where control is allowed by secrecy.
    All this history has at its core, the choice of leadership, ensures the direction a country goes. And every time the people got up from the chains they were bound by, the powers that be “us/the west”, came back in to re tie them…
    So it seems disingenuous for the question to be asked as to why the world is so tied to the west… it wasn’t by choice.

    Reply

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