The demobilization of the economy

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By GILBERTO BERCOVICI*

The role of the State and economic law are essential to combat the pandemic and the negative effects of the economic and health crises

In the current crisis of the Covid-19 pandemic, the role of organizing the economic process of economic law becomes evidently fundamental. This importance is not due to a situation that many mistakenly equate to the so-called “war economy”. After all, the “war economy” requires the total mobilization of the factors of production in the effort to defeat the enemy.

However, paradoxically, as some authors have noticed, such as James Meadway and Adam Tooze1, the current health crisis precisely requires the demobilization of various sectors of the economy, such as various segments of service provision, while others, such as the industrial sector, for example, must not only be mobilized, but even expanded. It has become essential to have to guarantee people's income, regardless of whether they are employed or not, the supply of basic products and the continuous functioning of essential services, demanding the suspension of the mercantile logic that has been dominating economic and social relations in recent decades. As Victor Marques very well states, the mobilization of public powers deals, in the current situation, with “the need for massive, rational and planned demobilization”2 The planning and structuring of the economic process require, however, a more present and intense action by the State through economic law.

In the United States, President Donald Trump, after proclaiming a National Emergency due to the Covid-19 pandemic, issued Executive Order 13.909 on March 18, 2020, assigning the powers inscribed in Title I of the Defense Production Act from 1950 to the Secretary of Health (Secretary of Health and Human Services) so that it can prioritize and allocate all the medical and health resources needed to fight the pandemic in the United States. Executive Order No. 13910 was also issued on March 23, 2020, attributing to the Secretary of Health authority to prevent the excessive accumulation of medical and hospital products or their acquisition with a view to resale above market prices, and the Order Executive 13.911, of March 27, 2020, delegating the same authority and powers also to the Secretary of Homeland Security (Secretary of Homeland Security). O Defense Production Act of 1950 gives the President (or the authorities to whom he expressly delegates) a series of powers and competences to restructure and mobilize the economy, direct and encourage North American industries in the interests of national defense3.

In Brazil, there was an express provision in our legislation for numerous instruments, similar to the measures present in the Defense Production Act of 1950, which would enable the Government to be able to deal with crisis situations, such as the current Covid-19 pandemic. In this regard, Delegated Law No. 4, of September 26, 1962, drawn up during the parliamentary period of the João Goulart Government, stands out, which had the purpose of regulating how the Government could act to ensure the free distribution of essential goods and services for consumption. and use of the people4. It dealt with exceptional measures in case of supply crises.

The Federal Government5 had the power to buy, store, distribute and sell, among other products, medicines, sanitary articles and industrialized articles for domestic use and products and materials indispensable for the production of those goods (Article 2, I, 'e', ​​'i' and ' k' of Delegated Law No. 46). The Executive Branch was authorized to set prices and control supply, including production, transport, storage and production, expropriate or requisition necessary goods and services, always subject to compensation.7, and promote incentives for production (Article 2, II, III and IV of Delegated Law 48), even being able to acquire goods and services abroad, if necessary (article 2, paragraph 1 of Delegated Law 49). Delegated Law 4/1962 also authorized the bodies responsible for controlling supply to regulate and discipline the production, distribution and consumption of raw materials (Article 6, II), the regulation and discipline of the circulation and distribution of goods, with the power to prohibit the circulation or establish priorities for transport and storage (Article 6, I), establish the maximum price table (Article 6, III and IV), maintain a stock of goods (Article 6, VII), among other measures to be used in case need or in the public interest10.

It is clear, therefore, that Delegated Law 4/1962 provided the government with fundamental instruments, many of them inspired by US legislation, to be able to act in the event of serious crises, such as the current pandemic. However, for purely ideological reasons, Brazil was left without the possibility of using the measures provided for by Delegated Law 4/1962, in view of its express revocation by Article 19, I of Law No. 13.874, of September 20, 2019, the so-called “Law of Economic Freedom”11.

With the repeal of Delegated Law 4/1962, the legal parameters for State action in times of serious economic and social crises were lost12. The measures provided for in Law No. 13.979, of February 06, 2020, which establishes the measures to be taken to face the health emergency caused by the Covid-19 pandemic, do not have the same scope and do not confer the same possibility of action on the part of the State. , particularly with regard to the requisition of goods and services (Article 3, VII13).

As it is easy to see, the role of the State and economic law are essential in combating the pandemic and the negative effects of the economic and health crises. But economic law, in a State capable of planning and restructuring production factors, is even more important for the reorganization of the Brazilian productive process in the post-crisis period. And this is even more fundamental if we take into account the assertion of the German historian Reinhart Koselleck, that one of the main characteristics of the modern State in its formation process was to arrogate to itself the monopoly of the domination of the future14. A State, like the current Brazilian State, which gives up planning for the future, in this way, gives up one of the fundamental characteristics of its own statehood.

*Gilberto Bercovici is Professor of Economic Law and Political Economy at the Faculty of Law of USP. Author, among other books by Elements of infrastructure law (Countercurrent).

Article originally published in Triggered Portal.

Notes

  1. James MEADWAY, “The Anti-Wartime Economy”, Tribune, March 19, 2020,https://tribunemag.co.uk/2020/03/the-anti-wartime-economy> and Ezra KLEIN, “What Both the Left and the Right Get Wrong about the Coronavirus Economic Crisis: Financial Historian Adam Tooze on the Lessons Policymakers Need to Learn, and Fast”, Vox, March 28, 2020,https://www.vox.com/2020/3/28/21195207/coronavirus-covid-19-financial-crisis-economy-depression-recession>.
  2. Victor MARQUES, “From the Keynesianism of Coronavirus to Permanent Antiwar”, Literary Autonomy, April 4, 2020,https://autonomialiteraria.com.br/do-keynesianismo-de-coronavirus-a-antiguerra-permanente>.
  3. For an analysis of the Defense Production Act 1950, see Gilberto BERCOVICI, “COVID-19, Economic Law and the Industrial Health Complex” in Walfrido WARDE & Rafael VALIM (coords.), The Consequences of COVID-19 in Brazilian Law, São Paulo, Countercurrent, 2020, pp. 253-257.
  4. See the historical journey in Alberto VENÂNCIO Filho, State Intervention in the Economic Domain: Public Economic Law in Brazil, Rio de Janeiro, Ed. FGV, 1968, pp. 117-119, 225-239 and 364-365 and Maria Yedda Leite LINHARES & Francisco Carlos Teixeira da SILVA, Political History of Supply (1918-1974), Brasília, Binagri Edições, 1979, pp. 89-117 and 156-173.
  5. The normative powers of Delegated Law No. 4/1962 were attributed exclusively to the Union, and the States, when applicable, were responsible for its execution, as expressly determined in its article 10: “It is incumbent upon the Union to dispose normatively, on the conditions and opportunity of using the powers conferred in this law, and the States are responsible for the execution of the norms set down and the inspection of their fulfillment, without prejudice to identical supervisory attributions recognized to the Union.
    1º - The Union will exercise its attributions through an act of the Executive Power or through the federal bodies to which it assigns such powers.
    2º - In the absence of adequate administrative instruments, on the part of the States, the Union will be responsible for this execution and supervision.
    3º - In the Federal District and in the Territories, the Union will exercise all powers for the application of this law”.
  6. Article 2, I of Delegated Law No. 4/1962: “The intervention will consist of: I – the purchase, storage, distribution and sale of: a) foodstuffs and products; b) cattle, swine, sheep and goats destined for slaughter; c) poultry and fish fit for food; d) fabrics and shoes for popular use; e) medicines; f) Instruments and tools for individual use; g) machines, including trucks, “jeeps”, tractors, motor-mechanized sets and spare parts, intended for agricultural activities; h) wires, barbed and smooth, when intended for use in rural activities; i) sanitary articles and industrialized artifacts for domestic use; j) cement and iron laminates, intended for the construction of own houses, of the popular type, and rural improvements; k) products and materials indispensable for the production of popular consumer goods”.
  7. Article 7 of Delegated Law No. 4/1962: “The prices of expropriated goods, when subject to the price list in force, will be paid in advance in current currency and cannot be arbitrated at a value higher than the respective price list.
    Single paragraph. When the expropriated good is not subject to prior pricing, prices will be arbitrated taking into account the average cost at the places of production or sale.” (wording amended by Decree Law No. 422 of January 20, 1969)
  8. Article 2, II, III and IV of Delegated Law No. 4/1962: “The intervention will consist of: II – setting prices and controlling supply, including production, transport, storage and marketing; III – in the expropriation of assets, for social interest; or in the request of services, necessary for the accomplishment of the objectives foreseen in this law; IV – in the promotion of stimuli, to production”.
  9. Article 2, §1 of Delegated Law No. 4/1962: “§1 – The acquisition will be made in the country or abroad, when there is insufficient national production; the sale, where to check the shortage".
  10. Article 6 of Delegated Law No. 4/1962: “For controlling the supply of goods or services and setting prices, the bodies in charge of applying this law are authorized to: I – regulate and discipline, in the national territory, the circulation and distribution of goods subject to the regime of this law, being able, including prohibiting their movement, and also establishing priorities for transport and storage, whenever the public interest so requires; II – regulate and discipline the production, distribution and consumption of raw materials, being able to request means of transport and storage; III – set the maximum prices for essential goods and services in relation to resellers; IV – set maximum prices and establish conditions for the sale of goods or services, in order to prevent excessive profits, including popular public entertainment; V – establish the rationing of essential services and goods mentioned in art. 2, item I, of this law, in cases of war, calamity or public need; VI – assist cooperatives, linked to the production or distribution of foodstuffs, in preferentially obtaining the goods they need; VII – maintain stock of goods; VIII – supervise and supervise, through federal agents, throughout the country, the execution of the measures adopted and the services established”.
  11. For an analysis of the numerous unconstitutionalities and mistaken decisions of the “Law of Economic Freedom” see Gilberto BERCOVICI, “Opinion on the Unconstitutionality of the Provisional Measure of Economic Freedom (Provisional Measure No. 881, of April 30, 2019)”, Financial and Economic Law Forum Magazine No. 15, March/August 2019, pp. 173-202 and Gilberto BERCOVICI, “The Unconstitutionalities of the 'Economic Freedom Law' (Law No. 13.874, of September 20, 2019)” in Luís Felipe SALOMÃO; Ricardo Villas Bôas CUEVA & Ana FRAZÃO (coords.), Law of Economic Freedom and its Impacts on Brazilian Law, São Paulo, RT, 2020, pp. 123-152.
  12. See, for all, Leonardo CORREA, “The Dogmatism of the Free Market, the Pandemic and Law”, Triggered Portal, March 20, 2020,https://portaldisparada.com.br/direito-e-judiciario/lei-delegada>.
  13. Article 3, VII of Law No. 13.979/2020: “In order to face the public health emergency of international importance resulting from the coronavirus, the authorities may adopt, within the scope of their competences, the following measures, among others: VII – requisition of goods and services from natural and legal persons, in which case it will be guaranteed subsequent payment of fair compensation..
  14. Reinhart KOSELLECK, “Vergangene Zukunft der frühen Neuzeit” in Vergangene Zukunft: Zur Semantik geschichtlicher Zeiten, 4th ed, Frankfurt-am-Main, Suhrkamp, ​​2000, pp. 25-26.
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