By FLAVIO TAVARES DE LYRA*
The current institutional apparatus was designed and is functional for the valorization of financial capital
The loss of dynamism in the Brazilian economy and the deindustrialization process associated with it date back to the beginning of the 90s of the 1980th century, during the government of Fernando Collor. It was at this time, after the “lost decade” (90-XNUMX), that neoliberal thinking definitively took hold, with its conception that it would be up to market forces to hand over the decisions determining the country's future economic expansion. Since then, the role of the State as driver of the development process and regulator of market forces has been increasingly limited.
However, the fact that the 1988 Constitution was drawn up with a conception that attributed to the State and its institutions the leading role in the process of economic development, changes were successively introduced in economic institutions to adapt them to the neoliberal worldview, in which the State had a merely supporting role to market forces. In other words, the direction of the development process began to be determined by the decisions of the private sector.
Within the neoliberal conception, the country privatized the petrochemical, steel and non-ferrous complexes and, more recently, Eletrobrás. The opening of foreign trade and the capital market were the direct causes of the 1999 currency crisis, which forced the country into the arms of the International Monetary Fund, the World Bank, the World Intellectual Property Organization and the WTO, international agents of the “Consensus of Washington.”
The relative good economic performance that the country achieved during the Lula governments (2003-6 and 2007-10) and the first Dilma Rousseff government (2011-2014), under neoliberal institutions, produced the great illusion that it was possible to resume the economic dynamism of the developmental era within the conception of neoliberal economic policy.
In reality, it was the “boom” of international exports, thanks to the demand generated by the expansion of China, a special and transitory phenomenon that largely determined the favorable situation that took shape. Once this positive impact had been attenuated, it became evident that it was unfeasible to generate economic dynamism and make social advances, under neoliberal institutionality and the predominance of market forces.
The successful fight against hyperinflation under the action of the Real Plan (1994) left as a legacy the institutional changes that made the pursuit of fiscal austerity and the restrictive monetary policy of the Central Bank dominant in the economic scenario, weakening, from then on, the action of the State as a guiding instrument for the country's investment policy.
The failure of Dilma Rousseff's second government to resume the development process with the neoliberal institutional apparatus, opened space for yet another advance by neoliberal institutions in the conduct of the country's economic life, with policies conceived under the umbrella of “The Bridge for the future” of Michel Temer’s government (2016-17) and the disastrous government of Jair Bolsonaro (2018-21), which plunged the country into economic stagnation and an unprecedented social crisis.
Lula's return to the presidency in 2022 has resurrected hopes of a resumption of the development process within a conception oriented towards structural transformations in the economy that lead to the acceleration of growth with reindustrialization, the transition to an economy that advances in improving income distribution and that protects the environment, taking advantage of the broad and diversified existing potential to improve the international competitiveness of production.
In its initial two years of governance, the new administration has sought to break the institutional shackles that prevent it from governing with a view to the long-term changes that reindustrialization requires.
In this sense, the government launched the “New Industry of Brazil”, an ambitious industrial policy proposal aimed at the reindustrialization of the country in a concept that emphasizes the promotion of technological innovation, the densification of production chains, the use of energy potential to generate energy “clean” and environmental sustainability. All of this, aiming to boost the country's economic activity and competitive capacity on the international stage.
The current institutions, however, were not designed to promote structural changes in the economy and move within a neoliberal vision that discards the fundamental role of the State in driving the development process.
The central issue of financing the economic process cannot be resolved without a reform of the fiscal system in order to provide the State with resources to finance social and investment spending.
The recently approved fiscal framework does not solve the problem as it is just another instrument to contain fiscal spending with a neoliberal cut, rather than a tool for a state that promotes development.
The public debt instrument, in the current architecture, cannot be used to strengthen the State's financing capacity. Even though the public debt index is much lower than that observed in developed economies.
The Central Bank has become almost exclusively an instrument for combating inflation and favoring the accumulation of fictitious capital to the detriment of productive accumulation. There are strong indications that the regulatory agencies operating in infrastructure and the Central Bank are captured by the private sector and do not respond adequately to the purposes of the new government.
The State does not have adequate planning mechanisms to guide long-term investment decisions. The Ministry of Planning became an agency for preparing and controlling the annual budget and an exclusive tool for austerity policies.
The State is practically prohibited from investing in basic activities for the country's development. Public-private partnerships, considered a way to expand productive investment, are nothing more than a disguise for public resources to be directed to strengthen the expansion and profitability of private capital.
The difficulties faced by the government in guiding the country's main state-owned company, Petrobras, to invest a greater percentage of its profits in productive investment have recently become evident. The capital market gives preference to the distribution of dividends to shareholders, in a short-term view and disconnected from the company's role in the country's energy development.
In short, the current institutional apparatus was designed and is functional for the valorization of financial capital. Without profound changes to its constitution, it will be difficult for the country to move towards a more dynamic production system, more respectful of the environment and more committed to social development.
*Flávio Tavares de Lyra, Economist, retired from the Institute of Applied Economic Research (IPEA).
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