Fiscal terrorism and financial totalitarianism

Umbo (Otto Umbehr) (1902–1980), Street Mystery, 1928.


Fiscal terrorism resides in the threat to the State with the aim of preventing it from providing minimum conditions of freedom for its citizens.

On March 14th, five years have passed since the murder of Marielle Franco, without the masterminds of the crime having been discovered. In an incisive speech, the Minister of Justice stated that we live in times similar to the Europeans of a century ago, in which feelings were mobilized to create unity around hatred.

Taking Flávio Dino's evaluation as at least partially coherent, we have to point out that, if the diagnosis regarding the social relations mobilized around affections is correct, the state institutional solution has been another. In recent years, instead of a totalitarian State, we have had a reality in which hatred and fear were mobilized to create a veil of genocidal abandonment in relations between State and society.

If we take a good look, with the systematic disorganization of social policies in the middle of the pandemic, the elimination of restrictions that prevented the decimation of indigenous peoples, the stimulus to arming the population and exclusively to individual entrepreneurship, added to the absence of policies to promote and guarantee jobs formalities, we live in a very peculiar time. Perhaps something much closer to the state of nature formulated by Thomas Hobbes, in the mid-XNUMXth century, than to the authoritarian, fascist or Nazi States of the first half of the XNUMXth century.

In the Brazilian case, if we survived the last few years, it was thanks to a state structure, made up of public servants, which insisted on functioning, despite all the dismantling projects applied to it. Such a project tried to overthrow the living and institutional pillars of a minimal democratic structure, which institutionally translates into the separation of executive, legislative and judicial powers, and the holding of periodic elections considered legitimate, with the inclusion of the entire population from a certain age.

This is the minimum democratic pact reached by several countries in the first half of the 20th century, which has been threatened in recent years in some parts of the world and, strongly, in Brazil. We managed, with a lot of effort and in a very disputed way, to save this arrangement. For our society to organize itself around the defense of this minimal democracy, an illusion had to be hard lost: that of democratic institutions being guaranteed.

Having removed, at least temporarily, the danger of losing our formal democracy, we now have to take a second step. In a previous article, inspired by an interview with Ernesto Raúl Zaffaroni,[I] we invoke the concept of financial totalitarianism, relating it to the fear mobilized by the market. Now let's analyze the role that fiscal terrorism plays in this totalitarianism. In the previous text, we highlighted that, for there to be totalitarianism, a planned economy is not necessary. In this text, we are going to suggest that a weak State is a propitious stage for fiscal terrorism and, consequently, a kind of market totalitarianism.

Debates involving current Brazilian economic policy revolve around the legal structure of public finances – the fiscal framework – which will replace the so-called “spending cap” instituted during the Temer government and disrespected without problems – thankfully – by the Bolsonaro government. Despite the electoral purposes, we need to have the courage to say that it was Jair Bolsonaro's disobedience to the spending ceiling that prevented the Brazilian population from experiencing an even more hungry and desperate situation than the one he went through. The secret budget and the Auxílio Brasil were spurious practices from the point of view of transparency and impersonality of public spending, but at least they contributed to some degree of public spending to mitigate the difficulties experienced by the vast majority of the population.

After the approval of the Transition PEC to the National Congress, the government is obliged to present, by next August, a complementary law dealing with the so-called “fiscal framework”. This is, in fact, the condition provided for in Constitutional Amendment no. 126 so that the end of the new fiscal regime and the expenditure ceiling become effective. We don't know for sure what will be proposed after it is negotiated internally in the team led by Lula. But according to Minister Fernando Haddad's indications, we will have some kind of combination of social responsibility and fiscal responsibility.

Judging by the manifestations of representatives of finance in the major media, any proposal that does not maintain the essence of the spending ceiling will be considered insufficient and fiscally “irresponsible”. The climate of blackmail and threat must be resumed after the government's proposal is published and it will also be throughout its processing in the two houses of Parliament. Some “experts” already treat the matter by the nickname of fiscal “anchor” and not fiscal framework, as the idea is really to hold back the possibility of increased spending at the bottom of the ocean with strong steel cables.

Seeking to contribute to the debate, the Institute of Functional Finance for Development (IFFD) released, in a public note,[ii] contribution to the design of a new fiscal framework. In it, the planning instruments provided for in the Brazilian Constitution of 1988 are valued – the Multi-Year Plan, the Budgetary Guidelines Law and the Annual Budget Law – with the defense of establishing spending “goals” instead of spending ceilings.

To assimilate this contribution, it is necessary to lose a second illusion around the relationship between State and democracy. The immediate memory of our republican history associates planning with authoritarian periods – Estado Novo and military dictatorship –, sometimes making it seem that governmental planning instruments are chains in the face of social spontaneity. We claim that they are not. On the contrary, the establishment of planned goals creates transparency and points of democratic debate around which state and social agents can dialogue, disagree, claim and, at the limit, reject.

Without planning, there is the possibility of contingent opportunism that gives the economically strongest broader possibilities to negotiate, blackmail and, at the limit, threaten. It is not the stability of the market that the government should aim for, but the security of everyday citizens' lives. And, for that, come the spending targets, according to the state capacities of the governments and, as the economist André Lara Resende has already indicated,[iii] until reaching full employment.

It is not about defending a State that throws money from a helicopter, in scenes that go back to movies in which Batman – defender of order – has to defend Gotham City of the cruel – and inconsequential – Joker. On the contrary. While there are no financial limits to the making of payments by a money-creating state, there certainly must be functional limits so that the consequences of spending are not undesirable.

However, if it is acceptable that banks and private companies “too big to fail” are rescued by the State whenever they are threatened with insolvency to prevent their failures from having destabilizing consequences for the economy as a whole, how much more justifiable can it be than the government spends enough to provide fundamental rights of the population with public goods and services and guide the economy to full employment, with respect to the inflationary limit of the economy?

It is the hasty rescue of banks and private companies that are financially bankrupt and threaten market stability that should not be done as often as it happens. If there is pressure for public resources to be guaranteed for high interest debt payments, this true terror practiced against citizens is what must be avoided. In this sense, the State cannot be a conniving or auxiliary agent of those who effectively practice terror.

The selective defense by financial market spokespersons of unrestricted public spending just to remunerate the wealth invested in government bonds reveals the petty and dishonest nature of their recommendations to the government. For such agents, the minimal democratic structure, with severe fiscal mechanisms to control the State's public expenditures, is the ideal scenario. It is the way to ensure that they, as domestic and foreign speculators and rentiers, continue to sleep peacefully.

But we know where this can lead. If the political structure is not able to economically promote what it promises in inclusion through voting, there is no democratic abstraction that sustains humanitarian values. If the “each man for himself” predominates economically, why would someone continually expropriated by unpayable debts – according to the very rules of this state financial structure – commit to the same structure, which is maintained by themselves?

Fiscal terrorism resides precisely in the threat to the State with the aim of preventing it from providing minimum conditions of freedom – that of not being financially expropriated on a continuous basis – for its citizens. Ensuring this freedom, in addition to the right to life, is what gives minimal legitimacy to a State that claims to be democratic.

* Paulo Kliass holds a doctorate in economics from UFR, Sciences Économiques, Université de Paris X (Nanterre) and member of the career of Specialists in Public Policy and Governmental Management of the federal government.

*Maria Abreu is a professor at the Institute of Research and Urban and Regional Planning (IPPUR) at the Federal University of Rio de Janeiro (UFRJ).

*Fabiano AS Dalto is director of research at IFFD and Professor at the Department of Economics at the Federal University of Paraná (UFPR).

*Daniel Negreiros Conceição President of IFFD and professor at the Institute for Research and Urban and Regional Planning (IPPUR) at UFRJ.





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