Devil's Advocate and Egg of Columbus

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By FERNANDO NOGUEIRA DA COSTA*

Defending an argument contrary to the majority opinion solely for the purpose of testing the quality of the hypothesis

“Devil's Advocate” was the expression used by the Catholic Church to designate the lawyer with the mission of presenting evidence preventing the admission of a candidate for saint or blessed. Its function was to verify all the facts presented in favor of the candidate, looking for flaws in the evidence of miracles of the candidate for sainthood. In contrast, in these processes of canonization and beatification, there was also the promoter of the faith, in charge of arguing in favor of the candidate.

The expression can designate the scientist in search of objections to a certain hypothesis, testing it with data and facts, to verify if his defense supports it as a thesis. This devil's advocate has to defend an argument contrary to the majority opinion just in order to test the quality of the hypothesis.

However many people find an idea correct, it is not enough to make that idea correct. You don't necessarily pronounce it correctly when you just pronounce it like everyone else. This “social proof” is used and abused in public debate, but it is false.

In recent research on currency and banks, whose report in the form of a digital book for download can be found at the end of this article, I have played devil's advocate in championing an abject cause for many laymen. According to many authors, whose only purpose is to “denounce capitalism”, there would be no morality in defending the hypothesis that “financialization” is a social achievement, that is, unfortunately, in Brazil, a late financial capitalism took place – the title of the book.

In my justification for acting as a devil's advocate, I say: the exploited workers in Brazil, since its colonization, "ate the bread kneaded by the devil", but not because of the presence of money and banks, but on the contrary, because they do not have access to money and credit management. This popular expression means going through great suffering or great difficulties.

It can be used to describe the degree of despair to which natives and slaves were subjected. For example, the cane cutter suffered, in his work, “the bread kneaded by the devil”, that is, by a supernatural entity of evil. All the exploited suffered the evil consequences passed by those who only had this “bread” for their survival – and not money.

In my research, I raised not only a Columbus egg, but a basket of them. This is a popular expression with the meaning of something difficult to accomplish while unpublished, it seems very easy, once it has been achieved. After all, anyone could accomplish the feat.

Some envious belittle the feat, including that of Christopher Columbus when sailing to America, and claim: any navigator could accomplish it. So Columbus challenged them to stand an egg upright. As no one could, he knocked the egg on the table, kneading one of the ends, and placed the egg on its feet. Afterwards, he joked: “Anyone could do this, but first it was necessary for someone to come up with the idea…”.

Then I list some Columbus eggs, obvious after they are all “put in the basket” (book) instead of spreading them out to diversify risk… The findings are in the digital book accessible to all readers to confirm or disagree.

The first Columbus egg is “the worst thing about capitalism is not reaching full financial capitalism”. Despite all its ills, the systemic change from the slavery regime, Brazil being the last country to abolish it in the Americas, and from the feudal servitude regime, for the dispossessed of land, to the salaried regime, was a historic advance.

Workers “free from (being and leasing) property” now have chances to educate themselves and sell their workforce for higher wages with union support. They obtain social mobility by accumulating certain money in banks as a reserve of value, for their future retirement, and before taking out financing for the purchase of a house.

The second Columbus egg is, in a representative sample of ten classic works of Brazilian historiography, “the absence of two key characters in the narratives about the history of Brazil: currency and bank”. As they already existed in Europe during colonization, it is not an anachronism to demand this information from Brazilian historians.

Classical Brazilian historiography rarely mentions, for example, the debate between “metalists” (defenders of a national gold currency with international acceptance) and “papelistas” (in need of paper money and loans for working capital). In the history of colonial Brazil, the type of relationship established between the Portuguese and the natives was barter, when it was not violence against slaves.

In order not to commit injustice, I emphasize Gilberto Freyre, in Casa Grande & Senzala, have stated “the patriarchal manor house played another important role in the Brazilian economy: it was also a bank”. Just as convents of friars also kept money. Metallic coins circulating in the Colony were scarce and controlled.

The third Columbus egg is “Recife could be New York!” [laughter]. Twenty-three Jewish-Brazilians, expelled from Brazil, were the pioneers of the first Jewish community in North America, in Manhattan, under the control of the West India Company of Amsterdam, the first stock company in the world. In 1792, among the founders of the New York Stock Exchange were three Jews, one of Portuguese origin.

Imagine, instead of Brazil being a public debt economy, having been a capital market economy for America! “The American Dream” is a ethos of the United States, whose founding myth is that everyone has a chance for prosperity, that is, social mobility achieved through “hard work in a meritocratic society” or “luck in speculative bets on the stock exchange by associating with large corporations for actions".

Few gain on the upswing, many lose on the downswings… The agency InfoMoney informs: “in Brazil, 0,3% of people are in jail, while 0,29% invest in the stock exchange. In the United States, 65% invest in stocks and 0,73% are in prison”. There's no correlation, but it's funny to have people looking for this false causality.

The fourth egg of Columbus is that Ignácio Rangel and Maria da Conceição Tavares were the pioneering authors in announcing, in the 1960s, “Brazil enters a new stage, in which development will no longer be commanded by industrial capital, but by financial capital” . If the left wanted to understand what was going on with Brazilian capitalism, it would have to study financial capital.

Many disciples, graduated from the “Escola de Campinas” (UNICAMP), among which I include myself, studied it. Many theses adopted the logical-deductive method, based on reading the theoretical-conceptual literature, inspired by Karl Marx and Rudolf Hilferding. Efforts to lower this abstract theory to that applied to new financial institutions are important. They even publicized the concept of “financialization”.

My book Brazil of banks (EDUSP, 2012) was written from field research based on primary sources with the historical-inductive method. I started from something particular – banks and credit – to a broader issue: the late evolution of financial capitalism in Brazil.

The fifth egg of Columbus refers to the comparative analysis between the Argentine economy and the Brazilian economy. “Financialization” makes it possible to alleviate poverty, more in terms of increasing the stock of financial reserves rather than spending income streams on interest. It does not, however, have the gift of reducing social inequality. “Definancialization”, as I showed in the case study of Argentina, due to banking disintermediation, dollarization and hyperinflation, increases both: poverty and inequality.

Both economies are very closed to international trade – and the only connection in terms of global value chains is with each other. On average from 2010 to 2019, imports plus exports from Brazil was just over 20% of GDP, the lowest among the countries compared, below even the United States and Argentina with less than 30% of GDP. Recently, they increased the degree of commercial openness to above 30%.

The sixth egg of Columbus is, in Brazil, the possibility of sustainable development, based on monetary-financial circulation between exporting agribusiness and non-exportable urban-industrial services. The first, together with the exporting extractive industry, provides a surplus in the trade balance in an attempt to cover the deficit in the service account, mainly due to the remittance of profits and interest by the multinationals installed here.

They are indispensable due to the lack of technological autonomy, due to the educational and scientific backwardness in Brazil. The vast majority of the population survives engaged in urban service activities, where by definition – a producer directly in contact with the consumer of his service – productivity is low.

For this reason, and for having the seventh largest population in the world, deductively, it has a low income per capita. To improve well-being, its people do need financial services: financing, payments and money management.

Without Financial Education, its people are divided between indebted (26%) – money is to be paid –, fighters (26%) – money is to be won –, skeptics (21%) – money is to be avoided –, materialists (15%) – money is for spending – savers (5%) – money is for saving – and planners (6%) – money is for multiplying. For this segment, invested money is money with compound interest to get more money.

Download the book by clicking on the link: Fernando Nogueira da Costa – Late Financial Capitalism.

*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).


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