Financialization in numbers

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By LADISLAU DOWBOR*

The power of large economic groups

The magazine Market economic: Large groups, published in December 2020, presents the evolution of the 200 largest economic groups in the country. Based on data from 2019, therefore before the impact of the pandemic, the study finds that “of the four sectors analyzed, only the Finance sector recorded an increase in net profit (27,1%). Trade (-6,8%), Industry (-7,8%) and Services (-34,8%) moved backwards” (1). It is not the economy as a whole, but the large groups, where finance predominates. The study underscores “the good performance of the financial area, especially banks, whose share in the consolidated net profit of the 200 largest companies increased from 37,7% to 48,9%”.

Translating: what pays off in Brazil is being a bank, and preferably a big one. The result is very impressive, since banks, intermediaries of other people's money, are a means activity, having to cost society as little as possible, at the same time that they make money more productive, stimulating the economy. A bank that gathers savings and offers credit at reasonable costs to industrial or agricultural producers or other productive sectors, makes entrepreneurs capable of generating employment and product.

When they extract more money from society than they contribute in productive terms, they are impoverishing families who spend in interest what they could spend on goods and services. This weakens demand, which, in turn, weakens companies, and both weaken the revenue stream to the state. Let us remember that we are in the eighth year of a paralyzed economy, since 2014, when the coup process began, the dismantling caused by Lava Jato, the electoral war, the promotion of “austerity”.

If China, or Vietnam and other economies are developing, it is because they control interest rates and channel financing to boost the economy. Here, intermediaries, instead of serving the economy, decided to serve themselves. The table below, which lists the 10 most profitable groups in the country, is clear. Petrobrás is in first place, but it is not exactly a 'producer': oil is from nature, and it is extracted, it is natural that it generates large profits. The next five places are occupied by banks.

In any case, it is an important document, because by presenting basic data on the largest groups in the country, it is bringing an X-ray of economic power, including the financial system, since both banks and other large groups constitute the essence of the stock market's activity, and they also play a central role in terms of political power.

It is very useful to approximate this study to the 200 large groups of the previous study by Forbes magazine, on the more than 200 Brazilian billionaires, which shows how the money appropriated by economic groups is transformed into personal fortunes. Joseph Safra, for example, recently deceased, increased his fortune in 12 months by around 30 billion reais, the equivalent of one year of Bolsa Família. Let us remember that large fortunes are exempt from taxes (law on distributed profits and dividends, 1995) (2).

The most recent data from Forbes shows that 42 Brazilian billionaires (in dollars) increased their personal fortunes by US$34 billion between March 18 and July 12, 2020. This is the equivalent of around 180 billion reais, 6 years of Bolsa Família , for just 42 people, with the economy in a downturn, and tax-exempt (3), while so many are struggling, because the pandemic has aggravated the process.

This is what has been called in the international literature “extractive capitalism”. The path to which our country is being carried is a huge setback. Producing here does not yield, or yields much less than speculating in the financial system. Deindustrialization is part of it, as well as the flight of companies.

*Ladislau Dowbor is professor of economics at PUC-SP. Author, among other books, of A era do capital improvutivo(Other Words & Literary Autonomy).

Originally published on the portal Major Card.

Reference


Economic Value: Large Groups. December 2020, Year 19, No. 19.

Notes


(1) Economic Value: Large Groups. December 2020, Year 19, Nº 19, p. 12.

(2) Forbes data on the fortunes of Brazilians are presented by Eduardo Moreira in https://dowbor.org/2019/11/eduardo-moreira-a-lista-de-bilionarios-da-forbes-e-a-destruicao-do-brasil-em-youtube-23-min.html/

(3) The Oxfam report is available at https://dowbor.org/2020/07/bilionarios-da-america-latina-e-do-caribe-aumentaram-fortuna-em-us-482-bi-durante-pandemia-oxfam-brasil-2020-3p.html/

 

 

 

 

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