ABC of contemporary economics

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By FERNANDO NOGUEIRA DA COSTA*

Some words and expressions used by economists can exclude people without knowledge of their vocabulary

Catchphrase is a phrase or expression of popular taste. A buzzword is a phrase made from the commonplace “cliché”. Jargon an expression used by a closed group of people such as a professional corporation.

Some words and expressions used by economists can exclude people without knowledge of their vocabulary. I then thought of a small ABC of contemporary economics with “magic words” ending with the suffix “ão”:

A – Share: makes its holder an owner of a certain fraction of a certain company open to do profitable business, allowing participation in the property and profits (or possible losses) of the company; when the majority controller obtains partners, to obtain capital and implement its disruptive innovation, it maintains management and a greater shareholding in the profit/loss division; the opening of capital, via an IPO of a minority share, allows its quotation to be attributed by the stock market and its appreciation guarantees borrowing money for mergers and acquisitions with a consequent increase in the market value of the shares and personal enrichment of the founding partners.

B – Banking: means access to the rights of financial citizenship, enjoying the three key functions of the banking system of which we are all (Individuals and Legal Entities) parties or customers: granting credit, to finance the expansion of productive capacity, production (working capital), consumption, housing, speculation (buying cheap assets to sell expensive) etc., and increasing the supply of jobs; money management, to take advantage of financial investments, protect the purchasing power of reserves and their financial income to replace income from work in retirement; provide popular access to the written payment system (electronic or digital) to offer security and practical ease to all “banked” users.

C – Centralization, Concentration and Competition: in opposition to so-called socialist economies, distinguished by state ownership of the means of production and centralized planning of the national economy, decentralization characterizes market capitalist economies, however, State capitalism or market socialism Chinese is very successful in encouraging competition between companies, ensuring through regulation that its economic system is not limited by the action of monopolies and/or by inadequate state intervention.

D – Deindustrialization: effect of deregulation, diversification and digitalization, in a process of structural transformation of the economy, redirected towards activities with a high level of productivity and technological complexity such as knowledge-intensive services, with a reduction in the share of industry in GDP, but without an absolute reduction in its added value; The price stabilization strategy adopted in Brazil with wild interest rates was associated with an anti-production and pro-import model, due to the denationalization of the production structure and business reorganization, with de-verticalization and international import integration.

E – Export: in the international division of labor, countries tend to specialize in the production of goods for which they have greater availability of productive factors, guaranteeing an exportable surplus; for example, Brazil (“world farm”) exports oil, ore and soybeans to China (“world factory”), in order to cover its imports of industrial products and reduce the deficit in the current account balance with remittances. of profits, interest on intercompany credit, royalties, etc. of the multinationals installed here, including to be exporters of the aforementioned commodities.

F – Financialization: it is a catchphrase for “the denunciation of capitalism”, whose money capital has always played a crucial role; the dominance of financial criteria for decision-making on the use of surplus income flows in stocks of financial assets allows social mobility with the enrichment of professionally well-trained workers; “Financialization” should not suffer the usual demonization because it allows these workers to accumulate financial wealth to maintain their standard of living in retirement without Social Security, when interest and dividend income will replace income from work – and they will become “rentiers”.

G – Globalization: there was no announced end to national economies, despite denationalizations with the increasing integration of markets, especially finance (via shares and bonds), media and transport; global value chains allow a company to be supplied through suppliers found nearby, in the northern continents of the world, each producing and offering the best price and quality conditions in those products with greater comparative advantages; the current trend is towards fragmentation of the global economy with protectionism, including the United States with its priority placed on national security and the search for leadership in semiconductors, clean energy and biotechnology towards this objective.

H – Hyperinflation: special case of uncontrolled inflation, in which prices increase because people do not want to retain the national currency, due to the rapid fall in their purchasing power, but rather seek foreign currency as a store of value and end up using -a as unit of account; Given the continuous devaluation of the official means of payment, when foreign currency is converted into national currency, prices rise uncontrollably.

I – Inflation: from 2001 to 2023, the annual average inflation in Brazil of 6,27% per year with a standard deviation of 2,44 characterizes inertial inflation – when economic agents periodically seek to restore their price or remuneration to the peak prior, taking payers to the real income floor -, and despite not being a demand inflation, the Central Bank of Brazil seeks to control it with an average interest rate (Selic) of 12,01% per year, resulting in interest average annual real of 5,4%, in the XNUMXst century, and leading to stagnation: stagnation of the income flow and concentration of the stock of financial wealth.

J – Judicialization of Interest: the judicialization of interest policy would be a legal phenomenon understood as the increase in the impact of judicial decisions on economic causes with political and social effects, where distributive conflicts would be taken to the Judiciary for a resolution; for example, anatocism is a legal term to define the charging of interest on interest owed, in a situation of default, a conduct vetoed by Brazilian law, but it is a necessary practice because interest is the remuneration of the opportunity cost of those who give up their money for someone else to profit from – not usury.

K – Keynesization: abuse of the argument from authority with citations, including mistaken ideas such as preference for liquidity in an economy with a banking network capable of capturing demand deposits to back its portfolio of debt securities; In the face of stagflation, that is, sharp inflation accompanied by recession, the Keynesian approach weakened, because one of its main pillars of support was the idea of ​​recessive unemployment bringing down inflation, in addition to state interventionism, for the expansion of income and employment with public spending substituted for private spending, even with the generation of fiscal deficits, when private spending retracted because of a liquidity trap during a great deflationary depression.

L – Liquidation: seeks to convert a company’s stocks or assets into cash, if the company is experiencing liquidity problems (lack of cash); promotes a sale with promotional prices, both to purchase raw materials and to pay debts; This is to avoid the total liquidation of the company, with consequent closure of the firm.

M – Monetization and Max-devaluation: the world economy adopts the predominance of the dollar, the North American currency, as a reserve of value and unit of account for foreign trade, requiring the conversion of national currencies to foreign currencies as a means of payments; Given this dollarization, the maximum exchange rate devaluation, as China does, always keeping its currency depreciated, aims to lower the prices of national products on the international market and obtain mega surpluses in the trade balance, through an increase in exports and a reduction in imports, expanding its reserves exchange rates; In Brazil, the maximum appreciation of the national currency combats imported inflation.

N – Neoliberalization: ideological doctrine seeking to disembed a presupposed free-market economy from the guardianship of society, restricting it to the principles of economic liberalism alone, such as economic life being governed by a natural order, emerging from free individual decisions , and whose mainspring for capital allocation would be the relative price system.

O – Bond: direct debt security issued by companies (debenture) or public debt security issued by the public authority with interest income and representing a loan made to the issuer; In the recent Brazilian case, neoliberals claim the growth in debenture issues occurred due to the withdrawal of the BNDES, but in fact it was due to the fall of the Selic, when non-financial companies, in the process of financial deleveraging, exchanged expensive debt for cheap, in longer term, in addition to replenishing cash instead of investments, whether in infrastructure or in the acquisition of equity shares.

P – Privatization or Planning: the privatization of a state-owned company generally occurs when it starts to show consistent profits, after the maturation of the pioneering investment made by the State, thus becoming an attractive venture for a private company, or after reorganization by the State, when it comes to a bankrupt company, absorbed by the public authorities; Worse is when the pro-free market State refrains from any planning, as occurs in command economies, to regulate the market through the elaboration of rigorous production plans with precise objectives for all economic sectors; instead of the state body in charge of planning determining the global objectives of each production unit and setting production quotas for each one, taking into account the availability of resources, productive capacity and relations between the different sectors of the economy, The market takes care of its self-regulation.

Q – Qualification and Settlement: workers without the required qualifications in the face of declining job offers resort to indebtedness and are only released from their obligation when there is a written declaration from the creditor that they have received a certain amount from the debtor relating to their credit for settlement; The loan must be a resource of last resort, including in the case of student loans, for qualifying in Higher Education, paying off debts and accumulating financial capital.

R – Regulation: 4th. Technological Revolution implies radical transformation within the scope of productive forces, profoundly modifying the mode of existence of the entire society; Industry 4.0 encompasses technologies for automation and data exchange and uses concepts of cybernetic systems, internet of things and cloud computing; its focus would be on improving the efficiency and productivity of processes, but without regulation technological unemployment tends to skyrocket.

S – Servicirization: tertiary activities are developed, predominantly, in urban centers and generate occupations (many precarious in terms of labor rights) for the unemployed because of the new technologies used in industrial and agricultural activities; services such as retail (the process of selling a product or service made by a company or micro-entrepreneur directly to its customer), care services and other personal services become the main driver of job creation, even with low productivity, because they are defined as the direct meeting between the producer/seller and the consumer.

T – Technologization: has a huge impact on the contemporary world of work, resulting in several transmutations: automation of the production process; digitization of many aspects of work (such as communication, production and data management); flexibility with home office; requirement for new professional training; technological unemployment and social inequality.

U – Usuralization: charging interest rates considered exorbitant, on credit cards distributed without evaluating the risk profiles of the beneficiaries, according to the dominant practice in the Brazilian model: out of every two users of revolving credit, one defaults and pays extortionate interest to compensate for the loss with another, because banks work with third-party resources – and cannot lose them.

V – Valuation: Petrobras shares appreciated, from Lula's electoral victory until 24/04/24, more than 155%, from R$ 16,20 to R$ 41,24; just the market values ​​of 10 shares account for 50% of the total traded on the Brazilian stock exchange of R$4,469 trillion; The appreciation and devaluation of shares in the global economy determine the fluctuations in world wealth, because they make up around half of financial assets and these make up more than half of it.

W – Wall Streetization: the capitalization of the NYSE (US$25 trillion) and NASDAQ (US$22 trillion), with around five thousand listed companies, is more than 47 times that of B3 with only 445 public limited companies; between 2013 and 2022, the total capitalization of all stock exchanges increased from US$65 trillion to US$105 trillion (US$120 trillion in 2021); 58% of the North American population (145 million people) invest in shares, but only 15% directly, the rest in Equity Funds; The 10% richest investors own almost 90% of the shares in circulation there, including institutional investors allocating capital in transnational companies in the “Wall-Streetified” global economy.

X – Xzation: billionaires' obsession with using Elon Musk founded X.com (future PayPal), SpaceX, xAI, went private and changed the company name from Twitter Inc. to X Corp. Xiii, go xfu…

Y – Yuppiezation: “yuppie” is a derivation of the abbreviation for Young Urban Professional, an English-speaking term coined in the Neoliberal Era to designate a greedy Young Urban Professional, whether on Wall Street, Faria Lima or Leblon.

Z – Zangão: nickname of an operator and/or investor on the stock exchange without accredited qualifications: invests all the money in shares; does not support variable income variations; naively diversifies the portfolio into shares of commodity exporters; he does day trade frantically to get ahead of the market-to-market, that is, the process by which the official settlement price of a future asset is defined and positions are adjusted; does not perform fundamental analysis and makes mistakes in technical or graphical analysis; does not reinvest dividends; abandons the goal of better qualification in his profession, with which he could obtain greater income, because of the greed of getting rich quickly and easily...

*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP). [https://amzn.to/3r9xVNh]


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