By LUIZ CARLOS BRESSER-PEREIRA*
Foreign debt is a forbidden word because rich countries and their financial institutions want developing countries to continue borrowing in foreign currency.
Mrs. Kristina Georgieva is the Managing Director of the International Monetary Fund (IMF). This week she gave a major interview to the newspaper Folha de S. Paul, in which he replaced commonplaces one with the other. He spoke only of public deficit and public debt.
She learned these commonplaces and neoclassical economic theory at the University of Sofia, Bulgaria, and then at London School of Economics and at MIT in Cambridge, Massachusetts.
In the interview, although the IMF was created to support countries with external debt (external, not public), she did not say a word about external debt, the exchange rate appreciation it causes, and the risk of a balance of payments crisis.
Why? Because 'foreign debt' is almost a forbidden word; anyone who uses it is not 'behaving well' towards the Empire or the Global North. It is forbidden because rich countries and their financial institutions want developing countries to continue to borrow in foreign currency.
That is why the Global North and liberal orthodoxy consider it 'good' for the country to incur current account deficits – 'moderate' of course – so that the Empire can export capital. Deficits that the quasi-colony also considers good, because it will 'grow with external savings'.
In fact, current account deficits (not public deficits) need to be financed, and direct investment and loans imply an inflow of capital that appreciates the exchange rate for as long as the deficit lasts. Industrial companies cease to be competitive and do not invest.
In this way, the happiness of the Empire increases because it can export its capital and obtain profits that it cannot achieve in the North, and it also increases the happiness of the fools (workers, rentiers and orthodox economists).
That lasts as long as the current account deficit lasts. And I fear, therefore, general happiness, while investments in developing countries are discouraged and consumption and foreign debt are encouraged.
That is why Mrs. Kristina Georgieva, a faithful servant of the Empire, does not speak of a current account deficit or foreign debt. She is a well-behaved lady.
* Luiz Carlos Bresser-Pereira Professor Emeritus at Fundação Getúlio Vargas (FGV-SP). Author, among other books, of In search of lost development: a new-developmentalist project for Brazil (FGV Publishing House) [https://amzn.to/4c1Nadj]
Originally posted on the author's social media.
the earth is round there is thanks to our readers and supporters.
Help us keep this idea going.
CONTRIBUTE
