Paulo Guedes, the picturesque

Shikanosuke Yagaki, Staircase, 1930–9


The unpopularity of the Minister of Economy stems from the indecency of his ideas and policies

The columnist, even the biweekly one, finds himself grappling, from time to time, with the specter of lack of subject matter. What, my God, to write about today? We inquire, afflicted. Almost all subjects look frazzled, exhausted, and depleted. And of those that are left, some seem too risky.

In Nelson Rodrigues' time, and before that of Eça de Queiroz, it was very different, dear reader. There was always, in Tunis, a Bey, obese, obscene and unpopular. And the chronicler had the resource of destroying the Bei, without ceremony. And it was a delight to criticize him, without any risk, in the prior certainty of total impunity. The Bei lived far away, and he and his advisors were completely illiterate in our beloved Portuguese language.

But there is a solution for everything. Here we have Paulo Guedes, our country's colorful Minister of Economy. True, he is not fat, nor exactly obscene, and he speaks Portuguese fluently (no physical accent, just a spiritual one). He does, however, have some points in common with the Bey of Tunis – he is unpopular and obscene (figuratively speaking). Unpopularity stems, so to speak, from indecency, its ideas and its policies; and we can therefore treat these two aspects at once.


Ultraliberalism, a point outside the curve

In the middle of the 21st century, Brazil had the unexpected misfortune to detain an ultraliberal economist in charge of its economy. Who could predict? The Brazilian was not given to extremism. Ultraliberals have always been rare among us. Brazilian economists, both left and right, tended to a certain eclecticism. They made their combinations and syncretisms, mixing liberalism, Keynesianism and, sometimes, pinches of socialism. According to our few ultraliberals, that was why the Brazilian economy was not taking off.

Behold, suddenly appears, triumphant, Paulo Guedes, a Chicago oldies, as he described himself in a good mood. Graduated in the 1970s at the University of Chicago, Guedes is a doctrinaire. Perhaps he should say "was", and I'll explain why. In the 1980s, when he began to take an active and exalted part in the Brazilian public debate, he was nicknamed “Beato Salu”, a character from a TV soap opera at the time, a fanatic who roamed the streets announcing the end of the world. If my memory serves me correctly, it was Belluzzo who came up with the right nickname.

Incredible as it may seem, before he concentrated all the reins of economic policy in his hands, Guedes had never had a stint in public service! He left the academy for the financial market. And, after decades in the market, he moved on to Brasilia. Straight from Faria Lima to the most complicated ministry on the planet – with the aggravating factor that it now has more powers and responsibility than its predecessors, since Planning, Industry and Commerce and, initially, Labor were incorporated into the Ministry of Finance. A superminister, therefore, without public sector experience! Episode worthy of the wildest chapters of Latin American fantastic realism.

But let's leave your professional career aside and deal, first, with the strictly doctrinal aspect. It is not always noticed, outside of academia, that the economics department at the University of Chicago, the motherland of ultraliberalism, is an outlier in terms of establishment international economy. In most major US universities, a version of economics is taught in which liberalism does predominate, but without excluding Keynesian elements. In other words, some presence of the State in the economy is accepted to mitigate trends that the market exhibits when left to its own devices, especially macroeconomic instability and income concentration. The defense of the minimal State, strictly speaking, is limited to Chicago and some of its academic subsidiaries.

Chicago ultraliberalism, also known as “market fundamentalism”, had its peak in terms of influence in the 1970s, still at the time of Milton Friedman, but has reaped successive defeats since then. The first and loudest, in the early 1980s, in the implementation of the monetary policy model advocated by the monetarists. Having failed in just that matter – coin! – the monetarists, were a little demoralized and insecure. There were so many disappointments that some of its most distinguished theorists – including Robert Lucas and Thomas Sargent – ​​took refuge in the academic ivory tower, implying, or even saying, that theory had nothing safe or useful to say about reality. of the economy. This purism has contributed to Chicago economists having played a modest role in the public debate about economics in recent decades. An ironic outcome for a school that had established itself with the practical activism of a Milton Friedman.


Brazil against international trends

In terms of economic policy and in international organizations such as the IMF, schools such as Harvard and MIT began to exert more influence in recent decades – which preach a liberalism that is not so pure and that accepts some presence of the State, although granting centrality to the action of the private agents and the functioning of markets. The so-called Washington Consensus and the neoliberal agenda that dominated from the 1980s until the first decade of the current century are much closer to this mitigated liberalism than to the ultraliberalism taught in Chicago.

Ironically, in recent years, the mitigated economic liberalism of Harvard and MIT has also entered into crisis. More than a crisis: it suffered a succession of shocks that practically liquidated it. It is no longer accepted even in the USA, its country of origin. The collapse began in 2008, when the Lehman crisis broke out, causing the end of the belief in the viability of a self-regulated private financial system subject only to light control and supervision by public authorities. In parallel, the concentration of income and wealth, which resulted largely from the application of the neoliberal agenda, led to a crisis of democracy, contributing to the election in the US and other developed countries of authoritarian leaders such as Donald Trump, without any commitment. with economic liberalism and prone to improvisation and wild pragmatism. In 2020, the shock of the Covid-19 pandemic came, an additional dramatic demonstration that economies cannot do without a strong, active State, with varied instruments, including in terms of national industrial policies. Finally, in 2021, Joe Biden buried neoliberalism for good, taking over with an interventionist and distributive economic program, with a Keynesian and Rooseveltian approach. Crossing neoliberalism on the street, Biden doesn't even say hello.

Well, precisely in this context, our Blessed Salu arrives in Brasilia. O timing it couldn't be worse. With him, Brazil went against the grain of international economic trends, adopting as superminister of the Economy an economist who professed ultraliberalism right at the moment when even eclectic and mitigated economic liberalism was embarrassingly retreating around the world! We pass to the condition of museum curiosity. In Washington, economists from the IMF – even the IMF! – looked this way, raised their arms to heaven and cried: “How can this be! How can you!”.

Into what astray has our dear nation been led! But doctrine is not everything, reader, never and never. Our Blessed Salu's thought was immediately subjected to the corrosive effect of political and social reality. And when doctrine collides with reality (any doubts?), the first quickly collapses.

Furthermore, there is a fundamental problem, already highlighted by several scholars of history and economic thought: ultraliberalism is incompatible with democracy. Your exaggerations, your radicalisms are not consistent with freedom, periodic elections, division of powers. Economic liberalism, taken to an extreme, corrodes political liberalism. It only survives with the destruction of democracy. It is no coincidence that the ultraliberalism of Friedman and Chicago practically only survived in Pinochet's Chile! It is by suppressing the constraints and democratic rights that it becomes possible to unleash pure and hard economic liberalism.

I reread the previous paragraph. It carries a certain tone of “political theory” incompatible, strictly speaking, with the style of the chronicle. Patience. Go like that. But there is actually a simpler, more pedestrian conflict between the folkloric figure of the finance minister and the national political system. As is known, the latter is dominated, today as never before, by the famous “Centrão”, that vast political group without ideology, without doctrine and even without ideas. When they saw Beato Salu, the “Centrão” politicians did not believe it. What planet would this minister have come from? What zoo did you run from? They asked, perplexed. But after the initial surprise, they tamed the newcomer, as expected.


Detours of ultraliberalism in Brazil

Thus, Minister Guedes currently has only a remote relationship with the ideologue who arrived in Brasilia in 2019. He shamelessly accommodated himself to the circumstances of the government, his boss and Parliament. To the dismay of some less realistic members of the buffoon crowd, little was left of the liberal agenda. What you have today is a caricature, and a very grotesque one at that. For example, privatization turned into pure and simple piracy, that is, attempts to buy public assets in the basin of souls. Administrative reform became an opportunity to withdraw basic rights from civil servants and make room for the transfer of public responsibilities to the private sphere. Tax reform has become an opportunity to extract tax concessions and protect unspeakable privileges, including legal loopholes that allow tax evasion in tax havens.

This brings me to the topic that has most mobilized the Minister of Economy's merciless critics – the so-called pandora papers, with the discovery, by foreign investigative journalists, that Guedes is part of a list of bigwigs who maintain large investments offshore in the Virgin Islands in the Caribbean.

Far be it from me to intend to exhaust the subject in this column. Let's wait for the explanations that the minister will give to Congress and public opinion. However, the injustice of some of the criticisms is obvious. Let's face it, the so-called tax planning (fancy name for tax evasion of the super-rich) is widespread. The super-rich don't cheat. Tax evasion is something for the poor, it's something for the well-off middle class at best. The super-rich hire specialists, lawyers, accountants, etc., to exploit legal loopholes and escape taxation unscathed. And, if by chance, the Federal Revenue tries to close some of these loopholes, including havens, there are lobbies to remove these devices from bills.

That's exactly what happened not so long ago. The Revenue tried to make some corrections, close some loopholes, through smuggling, in the Income Tax reform. The proposals passed through the careless scrutiny of the Minister and his advisers, but were overturned in Congress. With the agreement, as reported, by Guedes himself.

Conflict of interest? Let's stop being purists and hypocrites! Why demand that Guedes be a bright exception? After all, how can we expect him not to resort to tax havens and other mechanisms that allow him to escape oppressive taxation – the oppressive taxation that every self-respecting liberal hates since childhood?

Throw the first stone at Faria Lima, who never had a few measly millions parked in a tax haven!

*Paulo Nogueira Batista Jr. he holds the Celso Furtado Chair at the College of High Studies at UFRJ. He was vice-president of the New Development Bank, established by the BRICS in Shanghai. Author, among other books, of Brazil doesn't fit in anyone's backyard: backstage of the life of a Brazilian economist in the IMF and the BRICS and other texts on nationalism and our mongrel complex (LeYa).

Extended version of article published in the journal Capital letter in 15 October 2021.


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