Power and development – ​​the pointers of the world

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By JOSÉ LUÍS FIORI & WILLIAM NOZAKI*

Liberal ideology hides the central role of the State in the history and protection and development of the main world economies

“Ultimately, economic development processes are struggles for domination; and the interests of the nation constitute the last and decisive interests which must guide its economic policy” (Max Weber, Political Writings I. Folio Ediciones, Mexico, 1982, p. 18).

The story of modern economic development and the origin of classical economic theory has three dimensions that are conveniently overlooked by the “liberal narrative”. The first is that the State plays a strategic role in the economic development of nations. Without state power, there would be no Italian trade routes, no Iberian colonial expansion, no Dutch commercial revolution, as well as no English, French, and later American industrial revolutions. Furthermore, without state power, there would not be the late development of Germany, Russia and Italy, or the invitational development of Japan and South Korea, not to mention the recent cases of successful state planning in China and Vietnam in early XNUMXs. XXI century.

The second historical dimension hidden by economic liberalism is the birth of classical political economy, directly linked to the need of the first States to increase the economic surplus to meet fiscal, territorial and naval needs, in addition to obligations to guarantee food and health for the citizens, as is explicit in the recommendations of the pioneer William Petty to the English State.

The third dimension forgotten by liberals is that the economic theory of free trade and free trade, by Adam Smith and David Ricardo, only emerged and imposed itself as a “hegemonic theory” and a “victorious economic policy” after the Great Britain had already conquered Ireland and Scotland, won the “7 Years' War” and launched its colonial control over the United States, Canada and the richest part of India, maintaining strict protection over its naval and textile industry.

Since its origin, liberal economic theory has always been the theory suited to the needs and possibilities of the great “dominant powers” ​​within the world system. And even after reaching the top of the world economic hierarchy, it was the State of these great powers that continued to define – in the last instance – the “grand strategy” of their national economies, through their projects of colonial expansion, industrial advancement, in addition to investment packages in infrastructure, science and technology.

Despite this, it was always these same great powers, in particular Great Britain and the United States, that guided the debate on economic policy during the XNUMXth century, defending the theory and liberal policies necessary to maintain the primary-export insertion. from the periphery – regardless of whether these same central economies adopt more liberal-orthodox or more Keynesian-heterodox economic policies, depending on their own economic cycles and crises, and in light of their wars, catastrophes, or challenges to national security.

This is the case of the current situation, in which the United States itself, the leading power of the liberal world, has returned to adopt interventionist policies, and to adopt – explicitly and declaredly – ​​the economic nationalism of 1990th century Germany, of XNUMXth century Russia. XNUMXth and XNUMXst century China. All this at a time when Brazil entered a process of self-destruction, similar to that of Russia in the XNUMXs, led by a group of military and financiers fanaticized by the ultraliberal and outdated economic ideas of the Chicago School.

Since the financial crisis of 2008, culminating in the Covid-19 pandemic from 2020 onwards, passing through the intensification of the commercial and technological war between the US and China, the deepening of income and wealth inequalities, the worsening of climate and environmental emergencies and the possibility of a new war in Central Europe, there are many events at the beginning of the 2008st century that have demonstrated a new role for the State in the economy. The great crisis of XNUMX was faced with strategies of big quality big bank which involved intense state action through easing the foundations of the neoliberal macroeconomic policy, with a reduction in interest rates, expansion of the money supply, financial support, fiscal stimuli, exemptions, public investments, social spending, in addition to exchange rate and capital controls in some countries.

A decade later, in 2018, the intensification of the trade war between the US and China caused the US State to impose tariffs on around US$ 250 billion in Chinese products, while the Chinese State reacted by imposing tariffs on around US$ 110 billions in American goods. Tariff threats mainly impacted the telecommunications, processors, circuits and computer parts markets. Behind these tensions, there was also a technological and business dispute over innovations and infrastructure related to the 5G internet, whose development was also only possible thanks to the State's action in the industrial and ST&I areas.

Growing financial and monetary instabilities, accompanied by productive and commercial asymmetries, intensified income and wealth inequality. Currently, around 520 billionaires, the richest 0,01% group on the planet, hold more than 10% of global wealth, while the poorest 50% group has only 2% of the amount. Worried about how this inequality can block social mobility, prohibit the ideology of ascension by individual merit and lead to apathy or social chaos, millionaires from different countries defend taxation on their own fortunes and dividends, in order to defend the strengthening of the State .

Climate emergencies and their anthropic causes have made global warming and extreme environmental events part of the world's population routine; prolonged droughts, record floods and disorderly seasons are just some of the manifestations of how the pattern of production, circulation and consumption of goods can collapse the physical and biological systems that support human life on the planet. The systemic nature of these problems requires that they be addressed through a more integrated and cooperative interstate and international governance, in addition to demanding national targets for reducing, for example, the emission of greenhouse gases (GHG), which can only achieve success with state coordination and planning.

The Covid-19 pandemic, more recently, also made explicit the need for intense state action, both with the strengthening of health and security systems and social protection programs for employment, work and income, as well as support packages for companies, industrial reconversion or structural reindustrialization measures.

In the US, the Biden Plan is betting on a package of emergency measures, job creation and infrastructure reconstruction with investments that may even surpass the old New Deal. In China, the New Silk Road project and its “Made in China 2025” seek to consolidate the leading role of the Chinese productive structure in industry 4.0. The Franco-German industrial alliance, in turn, seeks to accelerate the trajectory of industrial development in part of Europe. It is no different with Russia and its state commitment, for example, in the expansion of gas and logistics infrastructure.

In addition, international organizations such as the IMF currently recognize the essentiality of new state income transfer programs that can address the situation of poverty, misery and hunger. The World Bank itself recommends greater attention to social protection, work and employment generation and income guarantee programs that can only be ensured through public policies promoted by the State. UNCTAD, in a recent study, recognizes that the global system of international production is undergoing an accelerated change due to the pandemic, with challenges that unfold from the new industrial revolution, with growing economic nationalism and the imperative of sustainability. These changes will have as their main result a greater strengthening of industrial and innovation policies, considering strategic sectors also articulated by the State.

In a recent special publication, even the magazine The Economist, recognizes that the international economy is entering a new period of more state interventionism. Between 2000 and 2022, the participation of government investments, national sovereign funds, public pension funds and state-owned companies is increasing in developed and emerging countries. According to the publication, industrial policies, labor protections, environmental legislation, taxation on companies and fortunes and antitrust regulations must be increasingly present in the arc of state action in countries.

After the liberal-conservative turn of the 1970s and 1980s, the utopia of globalization became the main idea of ​​the imperial expansion of the United States, the victorious country in the Cold War. But what was once again hidden by liberal ideologues is that this new hegemony of liberal economic thought came together with and is inseparable from an accelerated process of power accumulation among the great powers and the polarization of wealth between nations.

In the first two decades of the XNUMXst century, the national economies of the great powers once again appealed to the State, once again assumed the explicit defense of the protection of their economies and the promotion of large investments in infrastructure and technological innovation, with the objective of facing the challenges great challenges, wars and catastrophes of that period, and with the intention of winning or surpassing its great national competitors.

All this to the scandal of liberal economists, the financial elite and Brazilian generals, who, belatedly, insist on keeping Brazil against the grain of the world.

* Jose Luis Fiori Professor at the Graduate Program in International Political Economy at UFRJ. Author, among other books, of Global power and the new geopolitics of nations (Boitempo).

*William Nozaki Professor of Political Science and Economics at the São Paulo School of Sociology and Politics Foundation (FESPSP).

 

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