New developmentalism

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By LUIZ CARLOS BRESSER-PEREIRA*

Author's thoughts on his most recent book, recently published

1.

On the occasion of the launch of my latest book New developmentalism – introducing new economic theory and political economy, a reporter asked me what New Developmentalism is.

And he took the opportunity to ask if it wouldn't be better if 'the president worked harder' and stopped giving interviews and criticizing the president of the Central Bank, which made the price of the dollar increase. Here's my answer.

2.

About New Developmentalism: A founding article of the New Developmental Theory, from 2001, made a sharp criticism of the high interest rate, showing that its level was higher than necessary to control inflation and that the fiscal expense involved was enormous .

The New Developmental Theory is a development macroeconomics that offers policies focused on interest rates, exchange rates, and criticism of current account deficits. It shows that the interest rate should and can be reasonably low.

The exchange rate must be competitive, that is, it must ensure that companies using the best technology are internationally competitive. And the current account (trade balance plus services) must be balanced; not be in deficit and thus appreciate the exchange rate.

It is a heterodox theory that defends fiscal balance, but even more so defends current account balance, which liberal orthodoxy ignores, not caring about recurring current account deficits.

In addition to an economic theory and a political economy that was initially designed for Brazil, but is of interest to all countries, especially middle-income countries.

3.

The book New developmentalism – introducing new economic theory and political economy It was initially written on commission by an English publisher and was published in January in the United Kingdom. The Brazilian version is an improved version of the English one.

About fiscal balance: Brazil needs to cut spending to stop the growth of public debt, but I agree with President Lula: the adjustment should not be paid by the poorest.

I understand that rentiers and financiers should also pay their part by agreeing to lower interest rates instead of waging war to prevent the interest rate from falling. However, I disagree with the president on one point: it is necessary to link pensions to inflation, not to the minimum wage.

About Roberto Campos Neto: The president works hard, and is right to criticize the president of the Central Bank, who is today the leader of the financial-rentier coalition that dominates the country and captures public assets. The increase in the price of the dollar is pure speculation, it is part of this war against Brazil.

4.

About the Real Plan: It was wonderful because, overnight, it put an end to the high inflation that had plagued the country for 14 years. It was a rigorously unorthodox plan based on the theory of inertial inflation that I helped develop in the early 1980s. It is a mistake, however, to assume that it was costless.

Its economists, when they took over the government, became orthodox and established absurd real interest rates. Since then, they have dropped a little but, with his 'blessing', they remain scandalously high today. That's why I've said that the cursed legacy of the Real Plan was high interest rates.

* Luiz Carlos Bresser-Pereira He is Professor Emeritus at Fundação Getúlio Vargas (FGV-SP) and former Minister of Finance. Author, among other books, of In search of lost development: a new developmental project for Brazil (FGV Publisher). [https://amzn.to/4c1Nadj]

Reference

Luiz Carlos Bresser-Pereira. New developmentalism – introducing new economic theory and political economy. São Paulo, Editora contracurrent, 2024, 348 pages. [https://amzn.to/3Le7qN7]


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