There is something tragically predictable about the modern spectacle of democratic catharsis. In Brazil, fifty percent of the electorate plus a single solitary soul is apparently all it takes to declare total ownership over the economic lives of two hundred million citizens. Luiz Inácio Lula da Silva has reportedly managed the trick again, pulling off a runoff victory against Flávio Bolsonaro after stumbling in the first round. The red banners are waving in São Paulo, the Bolsonaro clan is presumably muttering about institutional bias into their microphones, and the rest of us are left to marvel at the sheer, unyielding endurance of the administrative state.
Watching South America’s economic engine lurch between the Workers’ Party and the Bolsonaro dynasty is like watching an embarrassing uncle alternate between two equally ruinous midlife crises. On one side, you have the dynastic nationalism of the populist right, which pays sporadic lip service to deregulation while handing out favors to allied agricultural syndicates. On the other, you have Lula’s antique brand of state capitalism, which views every private enterprise as a public utility in desperate need of a ministerial committee. Neither faction has ever met an agency budget they felt compelled to slash, but they will happily spend billions of public reals fighting over who gets to hold the regulatory stamp.
As Friedrich Hayek noted with characteristic understatement in The Fatal Conceit, the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. Brasília has always been the architectural manifestation of that very conceit—a city laid out from a central drawing board, housing a sprawling apparatus of bureaucrats who genuinely believe they can calibrate an economy through subsidies, state-owned banks, and five-year development agendas. Lula’s return to power guarantees that this bureaucratic machinery will not gather dust. We can safely anticipate a renewed appetite for industrial policy, price interventions at Petrobras, and the expansion of credit through state lenders, all paid for by an already suffocating tax burden.
Brazil is famous for the phenomenon known as the Custo Brasil, the legendary tangle of red tape, logistical dysfunction, and legal ambiguity that strangles productivity before a business can even file its initial paperwork. Brazilian tax compliance alone is widely considered an extreme sport, requiring corporations to spend thousands of hours each year merely calculating what they owe to three competing tiers of government. A change in administration does not cure this pathology; it merely redistributes the regulatory friction. Lula’s allies will assure the world that these burdens are the necessary cost of social justice, while the opposition will posture as defenders of free enterprise, conveniently forgetting that their own tenure did almost nothing to dismantle the underlying architecture of federal oversight.
The deeper problem exposed by this razor-thin runoff is the terrifying finality of simple majoritarianism. When a government’s reach is effectively limitless, an election decided by a handful of votes ceases to be a peaceful transition of power and becomes an existential zero-sum conflict. If the federal leviathan possesses the authority to steer domestic investment, dictate environmental compliance by whim, and reshape the tax code to punish disfavored sectors, then losing by half a percentage point feels like economic subjugation. Hayek warned that when democracy assumes total control over economic life, it inevitably degenerates into a factional scramble for the levers of state coercion. Brazil’s bitter polarization is not a cultural mystery; it is the natural consequence of having a government that is simply too large and too powerful to ignore.
Yet through all the political theater, Brazil’s real economy persists, not because of its political class, but in spite of it. The country’s resilient farmers, tech entrepreneurs, and informal market traders manage to create wealth every day while ducking the relentless onslaught of ministerial gazettes and contradictory decrees. They are the ones who produce the food and generate the revenue that Brasília so carelessly redistributes among its client constituencies. They will adapt to Lula’s latest cabinet reshuffle just as they adapted to the last one, routing around the inefficiencies of the state with the weary ingenuity that only decades of misrule can teach.
The coming months will feature the customary parade of political posturing, cabinet appointments, and earnest speeches about national unity from an administration that squeaked into power on a technicality. But behind the pomp, the true winner of this runoff is already decided. The administrative apparatus will continue to expand, the fiscal deficit will widen, and the regulatory tollbooths will remain open for business. No matter which faction claims the presidential sash, the state remains the only house that always wins.