By RENATO DAGNINO*
Our economists should theoretically be arming themselves for a change in the capitalist “mode of production”
To answer this question from an attentive left-wing student in my Science, Technology and Society course at Unicamp, who, even without being an economist, realized that there is a relationship between interest rates and profit, I said something similar to what I write here .
I started agreeing with my student. And I did it emphatically: you don't need to be an economist to realize that if we have the highest interest rate in the world here and a Brazilian pin is still produced, it's because the profit rate is higher than the interest rate. And that, therefore, your question, addressed to people on the left who rightly complain about the level of interest rates, makes perfect sense
In fact, it is evident to anyone that if a person has some money “to spare”, he will have to position himself in front of two options. That of hiring workers and, via the generation of surplus value – absolute or, if necessary, relative –, appropriating the economic surplus (profit) derived from the production of goods and services; and that of investing your money in the financial market to obtain interest.
In other words, what can be deduced from the observed reality, the income from the money allocated here by the proprietary class to the production of goods and services – profit – is higher than that invested in the “financial circle” – interest – which is conditioned by the income paid by the State to those who acquire public debt securities.
If it weren't like that, I told her, it wouldn't be worth it for those who have some money "to spare" to produce even a pin. And since, despite the de-industrialization that the property-owning class has been causing by the way it manages its money, there is still a lot of “made in Brazil” in business, you would be absolutely right: we would have to talk about the rate of profit!
My student, at this point, has revised her question: but is the concern about the interest rate not justified? Is it not greater than the rate of profit?
I tried to answer this way: as interest can only exist if profit is being generated somewhere, a situation in which the interest rate is greater than the profit rate will only last if the local property-owning class can benefit from the surplus- value extracted through the production of goods and services carried out elsewhere.
It is unlikely that a situation like this will occur in a peripheral territory like Brazil: the share of production costs derived from the use of the workforce (from the Brazilian working class) is one of the lowest in the world.
And it is this, moreover, that explains the fact that rich Brazilians have been adopting a systematic and economically rational behavior of “reserving” (from external competition) high-profit sectors to be exploited by rich people from other countries. For many decades they have been settling here to appropriate the added value generated by our working class.
But this is suicide, exclaimed my student! To explain why this is not the case, I had to resort to what I learned in political science. And I replied: throughout our history, what is usually called the proprietary class has managed to establish an institutional arrangement, typical of our “inherited State” (the one that the left must alter in order to build its “necessary State”), which is at the root of our high rate of profit and which ultimately conditions the current level of interest rates.
At the origin of this institutional arrangement lies the ability of our proprietary class to, through often amoral expedients, naturalize the adoption of a “state policy” in force for centuries, which guarantees a regime of super-exploitation of indigenous peoples, blacks, hungry immigrants, from the Northeast, those expelled from the countryside and the “unemployable”.
I also stressed that since this arrangement, which provides it with a higher yield in many historical contexts than its foreign partners (who since the conquest of our territory have “colonized” a culture of iniquity), elucidates many other things, it would be necessary to explain it. it in detail.
But, I returned to the topic of multinationals that seemed to interest my student the most, obsessed with the false dilemma of dependence vs. technological autonomy spread by her professors. I limited myself, therefore, to pointing out that it is thanks to this arrangement that our owning class has compensated for the non-exploitation of the profit potential that they realize here, but that it would be up to them, if they were not “peripheral”, to appropriate. By being able to "take it off" on our working class the cost of maintaining their rogue "way of life”, she has condemned the country to a situation that, were it not of the character it has, would embarrass her.
And, seeking to make her reflect on what she has been hearing about what for many is still seen as simple delay, indolence and parasitism or, worse, “lack of public investment in Science, Technology and Innovation”, I added another provocation. Try to understand thisway of doing business” as something structural, little averse to the action of policy makers who pretentiously try to confront the peripheral condition and its global determinants. As a rational choice of the proprietary class and its companies (and those that, being multinationals, are considered Brazilian due to having a CNPJ) conditioned by that arrangement and based on the ancestral behavior of the capitalist – economically rational – to prefer, whenever the context allows it, exploit absolute rather than relative surplus value.
But, after all, asked the student, is the pressure being put on the government by the left to reduce interest rates adequate?
Yes: the most relevant and reasonable reason is that half of the money collected by the government as taxes is used to service the public debt. And that this payment is calculated as an (interest) rate arbitrated by the Central Bank, after hearing the interests of the property class, which is applied to the money lent to it by the richest to finance past government spending.
Which means that the reduction in the interest rate is a condition for the leftist government to be able to spend more, in addition to changing its spending profile, to deliver what it promised. And it also means that, by spending more – with compensatory policies or buying from companies that generate wages but that “sterilize” their profits, the government will be promoting economic growth.
Impatient, my student replied: But is government spending, in an already “privatized” country, enough for that?
Before trying to answer, I thought it best to continue focusing on the interest rate and pointing out a second reason for this concern. Although less reasonable, given that it rests on a hypothesis (or theory) about the behavior of the owner class, it must be taken into account.
This hypothesis is based on the idea that there would be two fractions within the Brazilian property-owning class today – the “productivist” and the “rentier” – animated by different views about the political, economic and social environment and, therefore, endowed with a rationality very distinct.
This is an assumption that goes back to a very distant past in which the “productivist” fraction was the only one that interacted directly with the working class, extracting surplus value in the form of profit. The “rentier” fraction did not enter into a direct economic relationship of exploitation with the working class. It was fundamentally dedicated to negotiating with the “productivist” fraction, capturing part of the surplus value produced by the working class in the form of interest.
In a less distant past, when consumer credit began to coexist with the primary function of financial capital, another theory emerged that supports the narrative of “rentiers”. If, in a given economy (as long as it functions using all its productive, physical and human capacity) there is a drop in the interest rate, citizens, in their eagerness to consume using cheaper credit, will cause inflation. And she, mercifully cautions the propertied class, unfairly penalizes the working class.
As in Brazil – marked by peripheral oligopoly – what we have had is not “demand inflation”, this argument of the owning class, although skilfully wielded by it, does not deserve further comment. Even because, and as evidenced by the dramatic condition of indebtedness of the working class in a situation of relative price stability, “financial expropriation” can be as pernicious as inflation.
Anyway, resuming the thread, as the “productivist” fraction, to face the multiple challenges arising from the production and circulation of goods, needs to borrow money, it has to allocate part of its gross profit to pay the interest due to “rentier” fraction.
Thus, as they have very different interests in relation to the way they value their capital, these two fractions would behave in a way that is more than autonomous, antagonistic in relation to a decrease in the interest rate.
Where did that virtuous circle of economic growth come from, exclaimed my student? With the caveat that this circle has been increasingly criticized around the world for its unsustainability, I answered yes.
In fact, on the one hand, by ceasing to monetize their capital by buying public debt securities that are now less profitable, the “rentiers” would no longer capture such a high portion of the tax collected as debt service, would allow the government to spend according to your priorities.
On the other hand, the “productivists”, who need someone else's money to produce goods and services and benefit from a high rate of profit, could raise it at a lower cost from the “rentiers” who would no longer find such advantageous opportunities in the market. financial market.
I also emphasized that the period in which this would occur, which depends on the pace at which the actors involved would change their behavior and even seek to adjust profit and interest rates to their interests, is difficult to estimate. And that the result, although consistent with the current government's expectations, could occur at a time when non-compliance with its program has already led to serious governance problems.
With the skepticism typical of good students, she replied: That's too good to be true! In fact, I pointed out, the probability of occurrence of this desired accommodation depends on at least three factors.
The first, related to “rentiers” (many of whom are foreigners), is the level to which, realistically, the government could “by decree” lower interest rates to trigger that behavior. Given the fluidity and scope of the globalized financial market, it depends on the remuneration they could get in other countries. The fact that in the country that practices the second highest interest rate, it is about half of what exists here today, cannot be ignored when estimating this level. Estimate that must take into account the effect that is intended to be obtained vis-à-vis the political obstacles to be faced so that the reduction that would trigger that behavior occurs...
The second factor has to do with that supposed behavioral autonomy; or more radically, to the existence of those two fractions. It is related to the fact that the members of the “productivist” fraction, even as such, that is, as owners or partners in companies, are not just “productivists”. Judging by the declaration of a large number of local companies, that they earn significant “non-operating profits” (profits that do not come from production but from financial investments), it seems legitimate to ask about the effective result of a reduction in interest rates. Would he be as big as the one who values the rentier “logic”?
The third factor is also related to that alleged behavioral autonomy. More precisely, to the fact that today, all over the world and contrary to the past, this (hypothetical) “rentier” fraction also directly exploits the working class; which does not mean that he ceases to receive interest on the money he lends to “productivists”. Through its new role in the circuit of capital accumulation, it starts to enrich itself through the indebtedness of the working class.
Can you sum it up there, professor?
I tried: increasingly sophisticated, pervasive mechanisms of “financial expropriation”, with great media appeal, generate income and a volume of wealth that significantly alter the business environment of any country. Coordinated many times by corporations that have solid “productivist” roots, they work with “algorithmic perfection” (which replaces the old “millimeter precision”) along global value chains that benefit, even if subsidiarily, our class as a whole owner. All this implies a growing power to influence the elaboration of public policy in the sense of oiling the economic, political, social, cultural and even environmental processes in a favorable sense to the consolidation of an environment, which evidently involves and also favors the "productivists", the “financial expropriation”.
My student, who had been reading the “classics”, asked: returning to the two rates, why do our leftist economists maintain the hypothesis of autonomy?
Given that despite belonging to the “economic orbit” or more specifically to the “market environment”, they are associated with the (psychological, Keynes would say) expectation that the proprietary class has about the future, the reasons we suggest do not make them change their minds. opinion? And he added: are these two fractions of the property-owning class autonomous enough to bring about the desired effect of a drop in the interest rate?
Is it realistic the expectation, of Keynesian inspiration in the economic-fiscal plan, to seduce it to reenact, taking advantage of this fall and other subsidies, what happened twenty years ago? And is it legitimate to expect the Schumpeterian behavior that, in the economic-productive sphere, they presume? Could it be that, accustomed to peripherally profiting, exploiting absolute surplus value much more than relative surplus value, will local companies follow the path of competitiveness, paying decent wages, reducing tax evasion, currently estimated at 10% of GDP...?
But the hole is further down, she said! Agreeing, I replied: our economists should theoretically be arming themselves for a change in the capitalist “mode of production” similar to that which more than 200 years ago, with the “industrial revolution” gave rise to their profession. They should be more attentive to trends such as paralyzing unproductive financial rentism, the hateful and cynical privatization of common goods, the increasingly pervasive and unproductive appropriation of social wealth, the consequences that the strictly economic cause in the techno-scientific field and in the cultural environment and in the contemporary psyche.
In order not to fall into unfathomable professional beliefs and postpone any academic dissonance and political debates to another time, I listened to what she replied…
* Renato Dagnino He is a professor at the Department of Scientific and Technological Policy at Unicamp. Author, among other books, of Solidarity popular economy (editorial tome).
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