The future of the capitalist economy in Brazil

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By ELEUTÉRIO FS PRADO*

What can Brazilians, especially the poorest, expect from the future?

The capitalist economy in Brazil was heavily affected by the crisis of the new coronavirus that began in 2020 and which still does not have a set date to end: the level of GDP fell, unemployment rose and income and wealth inequality increased. Considering that the current crisis will not last forever, which may end in 2022, what do the next few years have in store for Brazilians? Knowing that it has been stagnant or almost stagnant at least since the beginning of the 1990s, what can Brazilians, especially the poorest, expect from the future?

An answer will be provided in this article, but it will not come until the end of the exposition.

Economists generally believe in the ability of economic policy to produce growth. Neoliberals have faith in the market: if Brazil has shown little potential to raise GDP, it is because the State has committed successive strategic mistakes in the past: it has neglected education and macroeconomic stability; sinned by protectionism and statism. The solution they propose is liberalizing reforms, which ultimately aim to increase the rate of exploitation of the workforce and deregulate markets so that capital can exercise its command without bureaucratic obstacles.

Keynesians trust in the State's ability to create the conditions and supplement the markets so that they can develop: it is necessary to increase public investment, maintain strategic state-owned companies, sustain a devalued exchange rate, tax the export of primary goods, implement effective policies income distribution, etc. If Brazil has grown little since the 1990s, this is due to “Thatcherism tupiniquim” that, abandoning economic nationalism, produced the deindustrialization, reprimarization and financialization of the Brazilian economy, as well as an enormous concentration of income and wealth.

If it is evident that economic policy does have a role in economic development, here we believe that it is necessary to question how decisive it can be. As implied in the previous paragraphs, there is no growth strategy without an understanding of capitalism and without a classist ideological base. The neoliberals speak in the name of an internal and globalist bourgeoisie and the nationalists construct a discourse about the possibility of an internal pact on the part of the bourgeoisie with the workers in general. To what extent can they contradict the logic of capital that has been imposing itself in the last two centuries and that is imposing itself now, with more strength and scope, globally? To what extent, for example, do certain proposals that come from modern monetary theory not conflict with the imperatives of capital?

It must be seen that since its emergence in the XNUMXth century, first as commercial capitalism and then as industrial capitalism, capitalism has constituted itself as an economic system geared towards encompassing the world market. Here, history only proves what a famous dialectical exposition had already pointed out in the mid-nineteenth century: capital is an automatic subject that tends to overthrow all obstacles that are placed in front of it, whether they are of a purely geographical nature or of an institutional nature.

Here, capitalism has to be thought of as a concrete totality in development, which is based on the generalized exchange of goods. These are produced privately, but are socialized through markets. Hence, the work that counts to constitute value is not concrete work, but the work that is socially active in the production of goods and that has been reduced to abstract work by the social process.

This sociability therefore requires money not only to mediate exchanges, but to concretely express abstract work, measure value. The logic of commodity production is not just a restricted logic of value generation, but a logic that tends to become universal. Value itself tends, therefore, to become value that is valued, that is, capital.

This is also why capitalism cannot be rigorously thought of as a production system that intrinsically aims to meet human needs in general. Its principle is to make money always generate more money and, only when this systemic goal is achieved, such needs can be provided, not equally and for everyone, but differentially according to people's ability to meet the needs of appreciation. of the capital.

The capital system thus demands that people become modern individuals, rational agents who are content to submit to this objective social power in the sphere of commodity production and circulation. And the consequence of this subsumption becomes estrangement and alienation – something that implies an interversion of the subject into an object through its participation in a real process that has its own motive.

The expansive logic of the system also demands that national States become competitors in the arena formed by the world market. If they are to guarantee the conditions for the reproduction of capital at the national level, they are forced to open up to international trade, submitting themselves to the forces that prevail there. As this dual determination is, ultimately, irresistible, one can understand why economic policies in general are limited in their ability to realize the aspirations of political forces in creating a specific form of national development. And this already occurs when they are expressed in the language of economic rationality.

The constraints imposed on the economic policies implemented within the scope of the national States is – to be emphatic – the necessary counterpart of the insatiable movement of self-valorization of capital. Desires never stop dreaming that they will come true, but capital's determinations never fail to wake them up to the nightmare of the real world. Well, globalization is a fundamental manifestation of this process that harasses everyone in today's world. It has evolved historically through successive waves, but it has occurred in effect because this has always been the case. telos immanent in the accumulation process.

And this is implied in the following passage from Marx's work:[I] “It is only foreign trade, the development of the market into a world market, that turns money into world money and abstract work into social work. Abstract wealth, value, money, and therefore abstract labor, develop as concrete labor becomes a totality of different modes of labor spanning the world market. Capitalist production is based on value or the transformation of labor embodied in the product into social labor. But this only occurs on the basis of foreign trade and the world market. This is both the precondition and the result of capitalist production. The power of capital as a really operative metaphysics in the development of modern society has been underestimated, even when it comes to be recognized as an automatic subject. Economic theories in general, however, do not recognize this and, therefore, rely excessively on the power of economic policy. However, it is possible to show how its logic imposes itself in a “silent” way on all countries that live on planet Earth and that are strongly intertwined by the world market. It is quite evident, for example, that the law of the tendency to equalize the rate of profit operates effectively on a global scale, even though respecting the degree of development”.[ii]

The graphs in the figure below, which cover a period of 70 years of the evolution of the global economy, show a surprising result.[iii] They show that the average profit rates of rich countries (G7), G20 countries and emerging markets (EM)[iv] all showed the same general pattern of evolution: they tended to rise between 1950 and 1967 and to fall after 1997. In rich countries, they tended to fall between 1967 and 1982 and, in emerging countries, they began to fall in 1974 without ever tending to recover . In the G7 countries, contrary to what happened in the EM countries, there was a recovery in profit rates between 1982 and 1997. The case of China, not dealt with here, appears as an anomaly in this pattern.

The profitability crisis of the 1970s hit almost all countries, but the neoliberal recovery was restricted to developed countries. Now, this occurred due to a differentiated impact of the neoliberal policies that were widespread at the time. These were oriented from the beginning to reinforce the international power of the imperialist countries, especially the United States.

In core countries, they reduced the level of workers' real wages, transferred labor-intensive activities to Asia, promoted financial liberation, etc. In dependent countries, the increase in interest rates in the US to combat inflation produced crises in peripheral economies; henceforth they had to submit to the international financial system, which reinforced their dependence. Instead of being an importer, many of them – like Brazil – have become exporters of capital.

The following figure presents the internal rate of return on capital for Brazil, whose pattern, it is quite evident, roughly follows the pattern of the aggregate of emerging economies, previously presented. With an important difference: instead of profit rates stabilizing between 1982 and 1997, they then tended to fall sharply. Thus, the democratic transition that took place from 1985 was accompanied by a tendency towards economic decline, which was operationally due to the neoliberal policies that sanctioned the new form of subordination, led by finance, put in place by the imperialist powers.

Now, one has to ask why the rate of profit is so important in the capitalist system in general. Well, it has been known since Marx that “the rate of profit is the sting of capitalist production”, since “the valorization of capital is its only purpose”. As a result, historical periods in which the rate of profit tends to rise are characterized as economic euphoria; on the contrary, when it tends to fall, there is always stagnation or even depression. Its downfall, as the author of The capital, delays investment, promoting “overproduction, speculation, crises, superfluous capital alongside superfluous population”. Well, this is exactly what happened in Brazil in the last fifty years. But this trend, however, was periodically reversed between 2002 and 2010 – during the Lula governments, as we know – due to a tree in the international markets of commodities.

The connection between the profit rate evolver and the accumulation rate evolver is now statistically well documented. When the profit rate grows, the investment rate tends to rise along with it. When it falls, the latter also tends to decline. This is what can be seen when comparing the evolution of the internal rate of return on capital in Brazil with the growth rate of the capital stock. The following figure shows this correlation with an important divergence. The profit rate began to fall in 1974, but the investment rate changed direction only from 1982 onwards. Now, this delay of approximately six years is due to the so-called II PND, a plan through which the military dictatorship tried to maintain your big Brazil project.

Given this general framework in which he tried to synthetically combine some of the critical theory of the capitalist mode of production with empirical data taken from national accounts, it is now possible to speculate about the future of this sociability in Brazil. What can you expect?

 

What can you expect?

It is possible to think of two alternative scenarios: in one of them, the neoliberal policy that has prevailed since 1990 would be maintained, which – it should be noted – seeks to subordinate the country's economic structure to the commandments of international capital and to the institutional conditions imposed internationally by the imperialist powers ; in the other, this “delivery” policy would be replaced by new developmentalism, which sees Brazil as a historical subject capable of a certain self-determination.

In one case there would be more of the same, but in the alternative case there would be important changes. As the new development does not dissociate the capital system from the State as liberal currents do, it foresees the adoption of a “moderate interventionism” with the following objectives: revert deindustrialization, increase public investment, keep the exchange rate undervalued, sustain interest rates lows, tax the export of commodities in order to neutralize the comparative advantage in the production of primary products.

As made clear earlier, economic policy in general has some effectiveness in the pursuit of certain objectives, but it cannot substantively counteract the deeper tendencies of capital accumulation, which now takes place as a global process that has strongly integrated all nations through middle of the world market. In any case, it is necessary to be concerned in the political struggle with institutional forms and with state policies, because they can be more or less unfavorable for workers in general.

However, as seen in the first graph presented here, the world economy is in a phase of long depression. And the capitalist economy in Brazil is not an exception, but a paradigmatic case. As a result, it cannot be predicted that this economy will again reach a level of accelerated development such as occurred in the period after the end of World War II until 1980, approximately.

Now, the author who writes here thinks that capitalism as a mode of production is now on its way out and that, therefore, the difficulties to obtain a credible growth will probably increase in relation to the recent past. Thus, he does not foresee that the future of the economic system, but also of Brazilian society as a whole, can be prosperous, smiling and frank.

It is therefore necessary to construct the alternative of a democratic socialism.

* Eleutério FS Prado is a full and senior professor at the Department of Economics at USP. Author, among other books, of Complexity and praxis (Pleiad).

 

Notes


[I] The present author owes this quote, taken from Book III of the surplus value theories, to a writing by Tony Smith: The place of the world Market in Marx's systematic theory.

[ii] The greater the degree of development of a country, the lower must be its product/capital ratio, which is, as you know, a determinant of the rate of profit. The other important determinant is the share of profit in the national product (GDP).

[iii] All internal rates of return shown here are taken from Penn World Table 10.1. They are comparable because the series were built using the same methodology. The aggregation of the G7, G20 and ME rates was done by Michael Roberts and published on his blog The next recession.

[iv] They are part of the G7: Germany, Canada, United States, France, Italy, Japan and United Kingdom. The G20, in addition to these seven, includes twelve other countries: South Africa, Argentina, Brazil, Mexico, China, South Korea, Russia, India, Indonesia, Turkey, Australia, Saudi Arabia. Twenty-seven nations make up the ME, including those twelve already listed that make up the G20.

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