By FERNANDO NOGUEIRA DA COSTA*
Considerations on the reaction of the “market” and the “mainstream media” to the appointment of Fernando Haddad as Minister of Finance
“He put on a green-and-yellow shirt / And went out there / He took off his doctor's ring / So as not to be talked about / And he left, saying, I want mamá / Mama, I qué mama, mama, I want mama / He had a gun on his belt…” (Ary Barroso)
Carmem Miranda, when singing more or less, anticipated the future of a backward Nation, in terms of socioeconomic development, and particularly uncultured. Brazil ranks only above South Africa, whose regime of deep and violent racial segregation – the apartheid – was maintained from 1948 to 1994, as penultimate among emerging and developed countries in number of people with higher education. Not to mention the lack of culture of countless graduates from private colleges.
Consider the reaction of O Mercado, aka would make limers, against the appointment of a university professor, Fernando Haddad, with extensive experience as Minister of Education and mayor of the largest Brazilian city, to the post of Minister of Finance. From the outset, he guided PIG (Coupist Press Party) leaders to demoralize him!
The PIG resumed the habit of misinforming public opinion, positioning itself beforehand against any “heterodox themes”, for example, the so-called Modern Monetary Theory (or MMT), common Mercosur currency and the new/old role of the BNDES. As usual, the newspaper's deputy editor-in-chief Valor Econômico titled his column with a flippant statement: “MMT is a juvenile prank”. He quotes unknown “experts” (sic), as they only speak under the condition of anonymity.
The coward says frivolities without being presented his identity (is it fictitious?) and/or a counterpoint of someone who defends the opposite position. “Starting to talk about MMT is utter nonsense. Just as talking about the common currency of Mercosur and ending the TLP [long-term interest rate] of the BNDES and returning to the old subsidy scheme are initiatives in terms of 'youth prank'”.
In the “big” (sic) Brazilian press, there has been no plural public debate since the beginning of the coup against President Dilma Roussef. Social-developmentalist economists, especially those from Unicamp, where she did her doctorate, were no longer accepted in her pages with the rare exception (Luiz Gonzaga Belluzzo) to confirm the rule.
On the day (09/12/22) of the appointment of Fernando Haddad Haddad, the chief columnist of Folha de S. Paul seeks to answer the question: “What does Fernando Haddad think about economics?” He denounces it: “he has already shown appreciation for the idea of increased spending having a multiplier effect (extra spending will yield GDP growth and revenue enough to be compensated), which is, as a general thesis, at least controversial and inspiring for gross economic bullshit” [?!].
The “çábium” (sic) refutes this concept of Keynesian origin, proved logically and statistically, in a non-constructive criticism for not presenting an alternative. He does not justify this conceptual disqualification, made as if he were the owner of the truth and did not need to fulfill his journalistic obligation to inform readers about this simple opinion of his with ignorance of the cause.
Another reporter from Price, a specialist (almost a spokesperson) at the Central Bank of Brazil, at least tries to reproduce the arguments of MMT proponents. "There is only one limit to how much the government can finance spending on issuing currency: if the economy is at full employment, running at full capacity, fiscal expansion can generate inflation."
For supporters of this theory, the Central Bank should keep interest rates as low as possible, preferably close to zero. Inflationary surges must be fought by the government not by raising interest rates, but by raising taxes or cutting public spending, that is, with fiscal policy.
Orthodox economists and the financial market, however, believe that supporters of the MMT overestimate the role of idleness in the economy in lowering inflation and ignore other factors that provoke price increases, such as expectations. If the government issued money to pay for more expenses, economic agents who adhere to the TQM (Quantitative Theory of Money) would start to predict an increase in inflation.
The rise in inflation expectations would, in fact, translate into higher inflation, as businessmen and workers would defend themselves with greater readjustments in prices and wages. The assumption is that everyone thinks just like the orthodox economists!
If interest rates were drastically reduced, investors would come to the conclusion that the remuneration does not compensate for the risk of a public debt with unlimited growth. There would probably be a flight to the dollar, provoking the depreciation of the national currency and bringing imported inflation.
This point has already been highlighted in academic debates held at Unicamp's Institute of Economics, with the best-known promoter of MMT in Brazil: the respectable André Lara Resende. I told him – and he accepted the argument – that MMT is not a General Theory applicable in all places and times: it depends on the economic cycle, in the United States, in addition to circumstantiating a peripheral economy, when its deduction is applied here.
All good practical decisions have as a prerequisite some scientifically and empirically proven abstract theory, lowering it to the level of transdisciplinary applied theory, reincorporating what was previously abstracted, and finally dating and locating. In the case of economies under the dominance of the dollar, it is first necessary to verify that they (government and state and private companies) are not heavily indebted in dollars.
If this indebtedness is under control and the country has sufficient foreign exchange reserves to stabilize the exchange rate, the problem to be monitored – in addition to the phase of the cycle (degree of idleness of productive capacity) – refers to liquidity management. In the Brazilian case, with this behavior, the Central Bank puts the Selic-market at the Selic-target level, according to the inflation target regime.
The limit for defining excess liquidity would be a very low interest rate instead of the usual Brazilian nonsense. Wouldn't it guarantee more concentration of financial wealth? Would it cause capital flight to the dollar as it happens in Argentina? Would it be a “Deus-nos-auda” (if not “the FFAA help us”) as the green-and-yellow shirt dresses at the doors of the barracks cry out?
What are the theoretical foundations of these coup people in favor of a military dictatorship against the democratic-electoral alternation of power? It's hard to believe she has at least "two neurons (no "s")"...
But just check the website page Mises-Brazil to verify the ideas of the “Tupiniquim Austrians” are not different from the very rare ones of the “patriots”. Paradoxically, the supporters of the Austrian School and, mainly, of the neo-fascist Ludwig von Mises, whose main clamor was against state interventionism, are allies of the defenders of “military and/or federal intervention”! For what reason? Because they place their anticommunist doctrine above all else. In her name, von Mises defended Italian fascism as a fair barrier.
Utopian communism – a critique of capitalist reality – never really existed. There was indeed, in his name, an experience of the USSR with a totalitarian regime, but criticized by egalitarian democrats and ended at the end of 1991, that is, more than 30 years ago! Did China overcome its socioeconomic and technological backwardness with state capitalism or market socialism? In fact, with planning articulating State and market!
Anachronism consists of a chronological error, when certain concepts, thoughts and customs are used to portray a different time than the one to which they actually belong. It is characterized by the misalignment and lack of correspondence between the particularities of the different eras, when factors specific to each era are mistakenly mixed in the same narrative.
In an article (https://www.mises.org.br/Article.aspx?id=1015), far-right “Austrian” libertarians list “the measures deemed essential and non-negotiable to be implemented for freedom to finally reach Brazil ”: sharply reduce government spending; sharply reduce all taxes; deregulate and reduce bureaucracy in all sectors of the economy; decriminalize the production, sale and consumption of all drugs; abolish the central bank, ministries and regulatory agencies; privatize all state-owned enterprises; end compulsory public pension; release the unrestricted carrying of weapons; ending the state monopoly on justice and security; end the requirement for a diploma and release homeschooling (homeschooling).
Those “desemparated by the military dictatorship” use and abuse the Scarecrow Fallacy: they present the arguments of the left in a caricature, with the aim of attacking these false ideas instead of the arguments themselves. Here, I do not do this with the arguments of the right, as I quote literally what is defended by statophobes: wild capitalism without any safeguards for those helpless by “cradle luck”.
Austria National Team shirt (whoops!).
*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Support and enrichment network. Available in https://fernandonogueiracosta.wordpress.com/2022/09/20/rede-de-apoio-e-enriquecimento-baixe-o-livro/
