The economist who knew Javanese

Jakarta. Image: Tom Fisk
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By FERNANDO NOGUEIRA DA COSTA*

Why, in terms of GDP per Purchasing Power Parity, despite the fact that the Brazilian economy ranks 8th in the world, has it been largely surpassed by Indonesia?

I have to play a trick on convictions and respectabilities in order to survive. I have to hide my capacity as a full professor to approach ignorant people without knowledge of Javanese.

Lecturing to Latin American students at Três Fronteiras, at UNILA in Foz do Iguaçu, I raised a structuralist explanatory hypothesis, rather than being based on short-term economic policy, for the Brazilian economic retreat in the world ranking of nominal GDP. In 2022, Brazil was in 12th place, just behind Iran, the latter with US$ 1,973 trillion, our country with US$ 1,895 trillion.

Ahead, in addition to the rich countries of North America and Europe, were the other emerging BRIC countries. Following closely behind, completing the G15, are South Korea (US$ 1,734 trillion), Australia (US$ 1,724 trillion) and Mexico (US$ 1,424 trillion). Argentina ranked 24th with a GDP of US$ 631 billion, equivalent to 1/3 of Brazil's.

Up to the 16th (Spain), all countries, except India (1,425 billion), China (1,412 billion), United States (331 million), have a population below that of Brazil (212 million). In 17th, Indonesia (nominal GDP of US$ 1,289 trillion) has a population greater (260 million), as well as Pakistan (220 million) and (Nigeria 218 million), the Brazilian.

What does it matter? According to the World Bank, in GDP per capita, Brazil ranks 72nd with US$15.893, China 85th with US$13.262 and India 123rd with US$5.701. Among these, Indonesia ranks 100th with US$10.517. They have large populations.

Per capita income by PPP (Purchasing Power Parity) does not reflect social inequality in income concentration. On the other hand, comparisons made on the basis of nominal GDP do not relate the purchasing power of a dollar to the local cost of living.

From the height of his hypothetical wisdom, “the economist who knew Javanese” with a structuralist approach defended his explanatory hypothesis. Population growth, concentrated in cities, leads to the predominance of occupation in urban services, by definition, of low productivity, as it refers to meetings of producers directly with consumers – often one to one.

This internal market is the main focus of national development, as urban services generate 70% of occupations and 70% of income. “Financialization” favors the slow and gradual accumulation of wealth with surplus labor income protected from inflation.

In the internal division of labor, in a complementary way (and to avoid exchange rate crises), the interrelationship with the external market offers a surplus in the trade balance, in order to cover the deficit in the remittance of profits and interest of the industrial multinationals installed here to explore the large internal market, in addition to payments on account for international services such as transportation, travel and equipment rental. As, traditionally, there is a deficit of around 3% of GDP in the current account balance, there is dependence on IDP (Direct Investment in the Country) to cover it, in a kind of “vicious circle” from the perspective of continuous and progressive denationalization .

Do what?! The country obtained financial autonomy, but did not conquer technological autonomy, given its delay in the massification of education, science and technology. It has an uneducated people with a low percentage of people graduated in higher education, about half of the Argentine population (40%) and much lower than that of South Korea (70%) and Russia (62%).

But “the economist who knew Javanese” needed to answer the question: why, in GDP per Purchasing Power Parity, despite the Brazilian economy maintaining the 8th place in the world ranking, was it largely surpassed by Indonesia?! This was together with Russia with US$ 4,7 trillion and well ahead of Brazil with US$ 3,9 trillion, that is, it infiltrated between the BRIC, the USA, Japan and Germany.

As Lima Barreto told me, “in this stupid and bureaucratic Brazil (…) I was once a Javanese teacher!” He helped me to follow him and turn to Wikipedia to look up the entry on Java and the Javanese language. I learned that Java is a large island in the Indonesian archipelago and… surprise! It's a former Dutch colony!

It falsified my hypothesis that “Recife could have been New York”, if the West India Company had not collected the debts of the Portuguese colonists to the Dutch. By going against the Catholic tradition of devoutly taking loans and not paying them back, based on the denunciation of usury, the Portuguese revolted with native troops against the Dutch Invasion (1630-1654) of Olinda and Recife in Pernambuco.

As a result of the invasions of the Northeast Region of Brazil, Dutch capital came to dominate all stages of sugar production, from planting sugarcane to refining and distribution. With control of the African slave market, it began to invest in the Antilles region.

With no money to invest, anticipate the wages of workers and neither dominate the refining and distribution process, Portuguese sugar was unable to compete in the international market. For this reason, the economy of Brazil (and that of Portugal) went into crisis until the discovery of gold in Minas Gerais in the XNUMXth century.

Worse for our history, in 1654, 23 Jews expelled from Pernambuco landed in New York City, until then known as New Amsterdam. Before, it served only as a trading post and temporarily housed merchants and navigators. Brazilians founded the first Jewish community on North American soil. Then descendants fought in the War of Independence and created the stock exchange (NYSE)!

The “economist who knew Javanese” had to inform himself in order, as a scientist, to falsify his previous hypothesis. If the Dutch invasion conquered all of Brazil, “Indonesia – and not Haiti – would be here!” But wouldn't geoeconomics remain a barrier?

Indonesia is a country located between Southeast Asia and Australia, being the largest archipelago in the world, comprising the Sunda Islands, the western half of New Guinea and comprising a total of 17.508 islands, many of which are uninhabited. As an archipelago, it has land borders with the eastern part of Malaysia (on the island of Borneo), Timor-Leste (on the island of Timor) and Papua New Guinea (in New Guinea), in addition to maritime borders with the Philippines, Malaysia , Singapore, Palau, Australia and part of the Indian territory. The location between two continents — Asia and Oceania — makes Indonesia a transcontinental nation.

When looking at a map of the main global value chains, the only discernible connection in Latin America is the integration of the automobile industry between Argentina and Brazil, while many Asian and European economies are highly interconnected through their trade relations, both with each other , and with other advanced economies. This is the case of Indonesia, with enormous competitive advantages for its trade bloc, in terms of transport costs, just like the European Union.

Foreigners have always been attracted by Indonesia's vast natural resources. Muslim Arab traders took Islam to be the dominant religion in the country and therefore it to be the largest Islamic country.

European powers tried to implant Christianity and fought each other to monopolize the spice trade during the Age of Discovery. It was when Portuguese navigators arrived, in 1511, and installed a Portuguese colony in Timor (1596-1975), with the Portuguese language being spoken by 5% of its population.

In 1975, Indonesia invaded and annexed the former Portuguese colony of East Timor, with military and political support from the United States, subjecting the local population to terrible repression. The death toll, among soldiers and civilians, was estimated at up to 180 people. There was a UN intervention and, in 1999, a referendum was held, when the Timorese voted for independence, which took place in May 2002.

After three and a half centuries of Dutch colonialism, Indonesia won its independence after World War II in another bloody armed conflict. In 1965, parallel to what happened in Brazil, a coup d'état by General Suharto, supported by the United States and its allies, overthrew the government of the populist leader Sukarno, under the pretext of stopping the communist advance.

The bloodbath killed more than 500 supposedly communist Indonesians. Violent and essentially corrupt, Suharto's military dictatorship until almost the end of the 1997th century, in XNUMX, promoted repression and oppression of the population. There as here...

The industrial sector is the largest in the Indonesian economy and in 2012 accounted for 46% of GDP, followed by services (40%) and agriculture (14%). However, the service sector employed the most people (49% of the country's total workforce), followed by agriculture (39%) and industry (22%).

The country's main imports include machinery and equipment, chemicals, fuel and food products. Among the main export products are oil and gas, household appliances, wood, rubber and textiles.

I have to continue studying my Malay, that is, that Javanese one…

Parody about: Lima Barreto. The man who knew Javanese. In: Italo Moriconi (org.). The One Hundred Best Brazilian Stories of the Century. Rio de Janeiro: Objective; 2000.

*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP).


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