Rich vs. Poor Discourse: Throughout History, This Has Never Ended Well

The Brazilian government spends more than it collects and does not appear willing to make the necessary cuts to balance the public accounts. Even with the highest tax burden in 15 years, the solution presented by the economic team was to make the population pay more taxes.

An example of this policy was the recent decree signed by President Lula in a rush to authorize an increase in the Tax on Financial Transactions (IOF) . The decision, however, was overturned by the Supreme Federal Court (STF) and is now suspended.

To avoid the image of fiscal mismanagement, the economic team has insisted on proposing to tax the super-rich, an argument that has been debated in the market. The problem is that Lula has reiterated the discourse that this is a dispute between the poor and the rich — an old rhetoric, with Marxist roots, that has historically shown disastrous results.

Cases such as Argentina, Venezuela and Nazi Germany illustrate the risks of this narrative. Adolf Hitler, for example, presented himself as a defender of workers, but maintained alliances with large companies such as Bayer , BMW , Siemens and Hugo Boss, which prospered during the regime.

In Brazil, President Lula is increasingly seeking to consolidate his image as the “father of the poor” and says that the rich are the problem, while at the same time declaring to the Electoral Court that he has assets of R$7.4 million in 2022. In addition, the office of his wife, Janja, who does not hold any elected office, costs the public coffers around R$2 million per year.

“Historically, class polarization always appears in times of fiscal tension or major reforms. It is a narrative with strong popular appeal, but it often diverts the focus of the discussion. This directly affects the investment environment in the country, and ends up penalizing even small investors,” says Fábio Murad, economist and CEO of Super-ETF Educação.

The narrative of class struggle also appears to be fragile from an economic perspective. The proposal to increase the IOF has generated doubts and confusion among people. Murad explains that the government's plan to increase the IOF for companies with revenues above R$6 million is focused on transactions involving securities and other financial assets.

“The IOF legislation is broad and can be adjusted by decree, which leaves room for future changes that also impact individuals. The tax is levied on various day-to-day financial transactions, such as foreign exchange, credit, insurance and even overdraft operations and investments outside the country via international brokerages,” he says.

Beyond financial and ideological issues, the class struggle has proven to be dangerous. An example of this was the attacks on a five-year-old child on the internet, with a teacher suggesting that the girl be “guillotined” for using a R$14,000 bag .

Another emblematic case was the invasion of a bank in the financial heart of São Paulo by members of the MTST (Homeless Workers Movement).

“Can you show me a single country in the world where the fight against the rich has led to prosperity for the poor?” asks German historian and sociologist Rainer Zitelmann, author of the book How Nations Escape Poverty.

With over 30 published books and a staunch critic of the philosophy of socialism, Zitelmann has studied the economies of several countries and argues that a country only grows when there is economic freedom. Freedom to do business benefits even the poorest, since it generates jobs and income for the entire society.

“Hatred of the rich has already destroyed many countries. Incompetent politicians are always looking for scapegoats for their own failures. In socialist countries like North Korea and Venezuela, the only rich people are corrupt politicians,” Zitelmann said in an interview with Gazeta do Povo last year.

Venezuela

In the early 1970s, Venezuela was one of the 20 richest countries in the world and the richest in Latin America. Today, it is the poorest in the region, with 80% of the population living in poverty, according to historian Rainer Zitelmann. “Almost eight million people have fled there: that’s 30% of the population!”

The collapse began when Hugo Chavez came to power in 1999 with a socialist and anti-imperialist speech. He said he would redistribute oil wealth to the poorest sections of the population. Not only did his speech fail, but the country entered an economic, social and political crisis, with hyperinflation, international sanctions and curtailment of freedom.

In 2013, with the death of Chávez, Nicolás Maduro deepened the dictatorial regime. Today, Venezuela is a poorer and more unequal country than it was. The old bourgeoisie was replaced by a Bolivarian bourgeoisie, made up of people loyal to the dictator, and the poor are more vulnerable to food and medicine shortages.

Argentina

A century ago, Argentina was among the three richest countries in the world, until another populist leader followed suit and brought the country to its knees. Promising to care for the needy, Juan Perón served three consecutive terms as president, from 1946 to 1974, and alongside his wife, Eva Perón , waged war against the rich.

Perón implemented labor rights for the country, such as an increase in the minimum wage and a reduction in working hours, but without fiscal support, the result was rampant inflation. He also nationalized railways, energy and communications companies.

Between 1946 and 1949, public spending tripled and the civil service grew by more than 50% between 1945 and 1955, according to Zitelmann. Many of these jobs were created to benefit allies of the Justicialist Party.

Germany

In Nazi Germany, Hitler sold the image of a protector of workers and an adversary of the bourgeoisie. However, despite his anti-capitalist rhetoric, he did business with major German businessmen and industrialists, who even bankrolled the regime.

In his other book, “Hitler: Anticapitalist and Antirevolutionary,” Zitelmann presents speeches, newspaper articles, and Nazi party records that show how the dictator manipulated the narrative to mobilize the masses and secure trade agreements. In exchange for supporting and investing in Nazism, businessmen were rewarded for their “loyalty.”

Hitler accused the Jews of bringing Marxism to Germany and, therefore, were responsible for all the problems in the country. The class division that began with discriminatory laws to block and confiscate Jewish property ended in the greatest genocide in history.

According to the magazine Adventures in History, a study by the German Ministry of Finance revealed that 30% of the German war effort was paid for with money stolen from Jews. Some who managed to leave Germany before the Holocaust had much of their wealth confiscated through an “exit tax.”

North Korea

North Korea describes itself as an independent socialist economy, but it is highly centralized and state-controlled. The government exercises total control over society and owns most of the means of production in the country. Leader Kim Jong-un's practices are more akin to a dictatorship or an absolute monarchy.

The country is divided by caste, according to family history of loyalty to the government. The most “trustworthy” live in the best neighborhoods and have access to the best schools and hospitals. The poorest are kept away, work in mines and rough labor, and cannot even come close to the highest caste.

In addition to social control and division since birth, North Koreans face shortages, poor infrastructure and international isolation.

Norway

In 2022 alone, more than 30 billionaires and multimillionaires (more than the total in the previous 13 years) left Norway after the center-left government raised wealth taxes to 1.1%, despite warnings that the move would “trigger capital flight and threaten job creation.” Many moved to Switzerland, where taxes are lower.