Short circuit. The virus and the return of the state

Sergio Sister, 1970, ecoline and crayon on paper, pencil and felt-tip pen, 66 x 48 cm
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By AMARO FLECK*

Comment on the book by economist Laura Carvalho

Two years after launching Brazilian Waltz: from boom to economic chaos, one of the best analyzes in recent national economic history, Laura Carvalho is now publishing Short circuit. The virus and the return of the state, in the collection “2020, Essays on the pandemic” by the publisher Toda. A collection that proposes to publish short books that dare to theorize about the ongoing calamity, on-site visit. With Short circuit, Carvalho not only updates the account of brazilian waltz, showing the outcome of something that had everything to go wrong (with the drift of the economic crisis that started in the Dilma Rousseff government and little or nothing attenuated in the Michel Temer government) and that still surprised by the size of the damage (with the Bolsonara hecatomb); how, again, it seeks to show signs of what could be a path of reconstruction.

the argument of Short circuit it's fairly simple: the pandemic only reinforces social trends already underway. For the author, since the 2008 global financial crisis, the neoliberal project of downsizing the State has been in decline, in slow agony. But if the event of just over a decade ago served to show the need for the State to stabilize the economy, mitigating its crises, the pandemic in turn reveals other functions in which it is necessary: ​​both to ensure levels of well-being and to to provide infrastructure and support productive and technological development. Most of the book is devoted to detailing each of these functions. Before presenting them, however, it is worth explaining her project.

Carvalho suggests that “the pandemic led Bolsonarism to short-circuit”. If the Bolsonaro government's closest genre is experiments in furtive far-right authoritarianism, its specific difference is the ultraliberal agenda in the economy. The pandemic has made these two aspects irreconcilable, creating an impasse in which the government needs to reinvent itself: “either the government changes the course of economic policy, responding to pressure from the military wing for an expansion of public investments, for example, or expanding social benefits permanently amid the deep crisis, or Bolsonaro will have lost support at the top of the pyramid without replacing it with approval at the bottom.” But this impasse does not reduce the risk for Brazilian democracy, not least because one of the effects of the crisis caused by the virus is the increase in social inequality and the consequent decline of the middle class, which acts as a catalyst for the democratic recession.

Faced with this risk, “the democratic field must gather strength in the networks of solidarity and mobilization generated by the collective tragedy imposed by the virus to constitute the basic nucleus of a project for the country.” And echoing or mocking the Bolsonarist motto, she concludes: “A project in which the Brazilian State, above all, places itself at the service of all”. The reconstitution of the five functions of the State, therefore, serves as a motto to think about this basic core of the country's project.

The five functions

Laura Carvalho lists the five functions of the State, without hierarchizing them in order of importance. The functions are as follows:

(1) Stabilizer: It is up to the State to mitigate the effects of economic crises, recessions and depressions, through countercyclical measures such as public investment and fiscal policies (expansionist in times of crisis; contractionary during growth). This function was well exercised in the post-war period, when the Keynesian prescription was in vogue, but it was left aside with the neoclassicals, as well as, later, by the neokeynesians. The Brazilian State has, in recent decades, acted as a destabilizing agent due to its pro-cyclical measures, notably because of the primary result target, which obliges the State to be more austere precisely at times when the economy is most retracted. The recent spending cap rule does not change the situation, but stifle state action.

(2) Investor: The State must also serve as a capital builder, that is, build “the physical structures that increase the productive capacity of the economy”. And this extends from the creation of roads to sewage collection, from energy distribution networks to the provision of social housing. The story here is very similar: this function was well exercised in the post-war period, but in recent decades it has declined as the myth of an inefficient state has gained strength. And the State doesn't even have a competitor here, as private investments are not enough to restart the economy, especially since companies only expand their production capacity when they see demand grow. The problem, again, is that the lack of investment in infrastructure has become a kind of State policy with the approval of the spending ceiling, so that today it is unable even to preserve the existing infrastructure.

(3) Protector: The provision of a social protection system capable of guaranteeing a minimum level of well-being for all is another of the functions of the State. The Protective State dates back to the social assistance programs introduced by Bismarck in Germany at the end of the XNUMXth century, but they only became generalized in Europe after the Second World War. With it, the State is responsible for providing guarantees: a pension that prevents poverty during old age; a health insurance that means that the individual does not run out of income when sick or disabled. Again, something very bad happened at the end of the XNUMXth century, as expenses with this protection system stagnated in relation to the size of the economies, despite the aging of the population and its consequent pressure on social security. Automation and its potential destruction of jobs and the precariousness of labor relations bring urgency to the institution of a new model of protection, based on a universal (and unconditional) basic income. At this point, Laura Carvalho makes an interesting distinction between three models of minimum income: the negative income tax (proposed by Milton Friedman), the unconditional basic income (Erik Wright), and the universal endowment of wealth (Thomas Piketty). While the negative income tax considers the minimum income as a kind of voucher which replaces the welfare state itself, insofar as the state would be released from providing health and education services with its institution, the unconditional basic income and the universal endowment of wealth suggest the minimum income as a complement to the state of social well-being, as an additional right that improves the lives of individuals. In the Brazilian case, a basic income would make it possible to reduce our inequality, which was already at obscene levels before the pandemic and which tends to get worse with it.

(4) Service provider: In addition to ensuring a social protection network, it is up to the State to provide services, providing a universal and free health and education system. State experiences in these areas date back to the XNUMXth century, but again it is only in the post-war period that this will be generalized. Carvalho discusses the three models of the Welfare State proposed by Esping-Andersen: the Scandinavian social-democratic model, the Franco-Germanic conservative and the Anglo-Saxon liberal. It shows how the social democratic model is more expensive (both in terms of social security and the financing of education), while the conservative spends a lot on security and little on education, and the liberal spends a lot on education and little on security. With this, the liberal State guarantees social mobility (as well as the social democrat, and contrary to what happens in the conservative). Carvalho notes that this is crucial to determine the ideal size of the State, as well as to define the taxation necessary to support it. She also recalls that this is a political choice of society, not economists, and that it should be taken into account in social mobilizations and elections.

(5) Entrepreneur: The last function analyzed is that of undertaking. Commenting at length on the book the entrepreneurial state (Penguin), by Mariana Mazzucato, Carvalho observes that the State was behind the financing of a large part of the innovations in recent decades, including, and above all, a good part of the technological inventions that rendered so much praise to the acclaimed geniuses of entrepreneurship (Steve Jobs , Bill Gates). This is the case, for example, of various components of an iPhone (“from the touch screen to Siri's personal assistant”). She also resorts to the taxonomy proposed by Peter Evans, according to which the State can assume a role of predator, by extracting personal benefits and diminishing the productive capacity, or of developer, practicing the opposite of prey: acting in a coherent way and connected to the civil society to foster productive capacity. The entrepreneurial role of the State is linked to that of an investor, although more focused on research and development. If well exercised, an industrial and technological policy would have the mission of solving problems that afflict Brazilian society, “being in the wake of the democratic demands of the population”. The theoretical origin of state entrepreneurship goes back to Schumpeter, for whom innovation is the engine of capitalist dynamics.

Some critical notes

Laura Carvalho is successful in what she intends to do: thinking about the foundations of what would constitute a basic nucleus of a country's project. And she does so not only clearly and well-argued, but also realistic, in the sense that even her most abstract considerations can be converted into sensible and supposedly achievable proposals without requiring immense imagination. However, I make two remarks: firstly, an absence draws attention. Carvalho barely discusses the environmental problem. It is true that she favorably mentions the Green New Deal when discussing the role of investor, and at another time comment on changes in the sphere of work that seek to “stop global warming” (something that, unfortunately, not even the most optimistic of climate scientists should believe is possible), but this is little if we consider that the climate emergency is an existential threat that could end our civilization in a very short period of time. And this means a lot for the economic discussion. For example, what is the point of maintaining fiscal responsibility policies if we cannot reduce carbon dioxide emissions? In this case, the rationale is to take on long-term debt without thinking about the consequences, since it is unlikely that in a hundred years, on a planet three or four degrees warmer (which would be a conservative scenario in view of our current trends), there will still be organized society, let alone money.

The other observation is related to this. It is the impossibility of sustaining a realistic position today. Deep down, the basis of a project for the future is not much more than the return to a project of the past: the Welfare State that was undermined by the neoliberal revolution (now added to an unconditional basic income due to the disappearance of jobs). . As the author is on the left, the version implicitly defended is the most inclusive possible (the Scandinavian social democratic model, I suppose). The dream is the institution of a tropical Norway. It's hard not to share it. But how possible is this? Carvalho has an imaginary liberal as his interlocutor, defender of the minimal or almost minimal State, but still in good faith (does it exist?). Her arguments are quite persuasive against him. But is it enough? Wouldn't it be necessary to investigate, for example, why against all evidence zombie ideas (to resort to Quiggin's term popularized by Krugman) continue to govern us? Why do we continue to bet on austerity if we already know that it doesn't work? I bet it's not because they have the best argument, but partly because there are those who benefit from this state of affairs, and partly because it results from abstract and impersonal dynamics rather than from conscious deliberations [1].

* Amaro Fleck He is a professor at the Department of Philosophy at UFMG.

Reference

Laura Carvalho. Short circuit. The virus and the return of the state. São Paulo, However, 2020, 144 pages (https://amzn.to/44c4l7x).

Note


[1] The book, as well as this review, was read and discussed with the group “Crítica & Dialectic”. Thanks to the members of the group for the discussion, criticisms and observations.

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