By PLINIO DE ARRUDA SAMPAIO JR.*

The “market” took advantage of the specter of inflation to push for an increase in interest rates and reinforce the chorus for the continuity of the fiscal austerity regime

Far from representing any real concern with the economic situation of the working class, the hysteria of the bourgeoisie in relation to a supposed threat of uncontrolled inflation is hypocritical, malicious and totally misplaced. It is a political-ideological initiative to manipulate public debate. The immediate objective is to block any objective discussion on the true causes of inflation and on the priorities that should govern economic policy in the 2022 elections.

While the rise in prices was restricted to the goods that make up the cost of living, seriously compromising the purchasing power of families, the priests of monetary stability remained quiet, even with an average price variation of the basic food basket in twelve months systematically above the threshold of 20% since September 2020, in the main capitals of the country. However, the expectation that the IPCA - a strategic indicator for readjusting the value of financial wealth - was enough to move from the 4% level to 8% in 2021, for there to be a generalized outcry in defense of greater rigor in monetary policy and Supervisor.

The increase in the current general level of prices is a temporary phenomenon and not a spiraling process of acceleration, as implied by the economic debate in the mainstream media. In 2022, inflation should return to the level of 2020. Indeed, the expectation of the “market” is that the IPCA for next year will be 4%, against an expectation of 3,5% at the beginning of the year – an insignificant increase, which does not justify the fuss against the risk of uncontrolled inflation.

Faced with pressure from large holders of wealth, the Central Bank immediately modified monetary policy. The expectation is that the economy's basic interest rate – the Selic –, which a few months ago was projected at around 4%, will reach above 8% by the end of the year.

The “market” also took advantage of the specter of inflation to reinforce the chorus for the continuity of the fiscal austerity regime. The pressure of the national plutocracy, reverberated in prose and verse by the Pharisees who set themselves up as guardians of the currency, is for the Spending Ceiling that strangles public policies to be maintained at any cost.

However, monetary and fiscal tightening are measures that only interest big capital and, particularly, public debt creditors. By acting on the effects of the problem – the inhibition of inflation by containing aggregate demand –, the orthodox prescription reinforces the structural tendency towards economic stagnation, ruling out any possibility of a recovery in the labor market.

The inflationary pressure that affects the Brazilian economy stems from circumstantial conditions and economic policy decisions. None of these determinants is related to “excesses” of expenditures derived from an expansionist monetary and fiscal policy (implicit diagnosis in the recipes of those who ask for greater monetary and fiscal tightening).

The increase in the general price level is, above all, a worldwide phenomenon that gained momentum from the second half of 2020. It is a movement basically associated with the significant rise in the price of commodities in the international market (which has been cooling down since May 2021) and the appearance of bottlenecks in production chains resulting from the effects of the pandemic (a problem that tends to lose momentum with the progress of immunization on a global scale).

The exogenous shocks on the general price level were amplified by the disastrous economic policy of Paulo Guedes (which only benefits speculators). Among the internal factors that boosted inflationary pressures, the following stand out: the strong devaluation of the Real against the dollar; the shortage of domestic supply of a series of important agricultural products in the population's consumption basket (such as rice and meat); and the shock of administered prices, especially petroleum-derived fuels and electricity.

The potentiation of inflationary pressures is, therefore, a direct result of economic policy choices, such as: the ineptitude of the exchange rate policy, which allowed a strong and unjustified speculative devaluation of the Real against the dollar (even with an absolutely calm balance of payments situation ); the absence of a regulatory stock policy to avoid shortages in the domestic supply of agricultural products; the subordination of Petrobras' pricing policy to the imperatives of the New York Stock Exchange; and the disastrous policy of managing the energy crisis, which allowed the reservoirs of the main hydroelectric plants to run out. Interestingly, the “market” hasn't uttered a peep about such matters.

With the GDP stagnant for seven years, the prostrated labor market, tight wages, social inequality on the rise, poverty growing on the rise, with more than half of the population in a situation of food insecurity, and public spending strangled by the law of the Spending Ceiling, the bourgeoisie takes advantage of a conjunctural increase in the general level of prices to reinforce the mantra of monetary stability as the supreme value that overrides everything.

The consented opposition's silence in relation to the sacralization of monetary stability and the refusal to consider the repeal of the Spending Ceiling as a national urgency barely disguise their absolute complicity with the Real Plan and its disastrous implications for the people's living conditions. For the situation of the working class to improve, the economic debate agenda must be turned upside down. The absolute priority of Brazilians must be a vaccine in the arm, food on the plate, emergency fight against poverty, decent employment for all workers, wage increases, reinforcement of the State's public spending capacity and the conquest of food and economic sovereignty. Only popular intervention has the power to unblock the debate on the direction of economic policy and open new horizons for Brazilian society.

* Plinio de Arruda Sampaio Jr. He is a retired professor at Unicamp's Institute of Economics and editor of the website Contrapoder. Author, among other books, of Between nation and barbarism – dilemmas of dependent capitalism (Voices).