Affiliated to the Workers' Party (PT) since its foundation, the professor at the Unicamp Institute of Economics, Plínio de Arruda Sampaio Filho, says he is surprised by the direction that the government of President Luiz Inácio Lula da Silva is taking to the economic policy of the country. “Things are not going as expected,” says Plínio, who on June 17 surprised the government and the PT itself by releasing a document containing harsh criticisms of the way the economy is being run.
Entitled “Interdicted Agenda – A Prosperity Alternative for Brazil”, the text is signed by 305 intellectuals and economists, most of them linked to the PT, who accuse the economic team of taking Brazil to a “dead end”, they charge opening a debate with the participation of society and presenting a list of suggestions to free the country from “market totalitarianism”.
“Society has been deprived of participating in or following a genuine debate on economic policy measures, most of which were decided in common agreement with the IMF in the absence of any democratic body, including the National Congress”, says the text. "Enough. We want to open the Brazilian political economy agenda and expose the black box of economic policy to open debate”, add the authors of the manifesto. One of the creators of the document, Plínio says that the idea of publishing it arose spontaneously and simultaneously among several PT intellectuals. “People realized that something needed to be done,” he says.
The manifesto lists seven suggestions to correct the course of current economic policy. They are: control of the flow of external capital and exchange rate management at a level favorable to exports; while high unemployment persists, reduction of the primary surplus through a responsible increase in public expenditure, in order to increase effective aggregate demand, inducing the resumption of development and employment; expansion of public spending at the three levels of administration, with priority given to spending on expanding education, health, security, assistance and housing services, major job generators, and also the responsibility of states and municipalities - which implies the restoration of health financial situation of the Federation, including through renegotiation of debts owed by States and Municipalities to the Federal Government; significant reduction in the basic interest rate, as an essential complement to the fiscal policy to stimulate the resumption of private investments; promotion of public and private investments in sanitation and infrastructure (logistics and energy), to ensure the improvement of the systemic competitiveness of the economy; encouraging immediate investments in private sectors close to full capacity; maintenance and expansion of the export incentive policy; and import substitution; income policy agreed to control inflation.
“We focus our suggestions on promoting full employment because it is a structuring policy for solving other social and economic problems”, says the manifesto. Belonging to the PT group of economists since 1989, having actively participated in Lula's electoral campaign in the same year, Plínio said that the government reacted badly to the manifesto. “He simply tried to disqualify the document, without opening it up to debate”, he observes. For Plínio, however, the publication of the manifesto only exposed a situation that was already being experienced within the PT itself. “The party is on the boil. I would say that a third of the party does not accept the direction of current economic policy,” he says. Below are the main excerpts from the interview that the economist gave to Jornal da Unicamp on June 25th.
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Jornal da Unicamp—Why a manifesto at this time of events
Pliny—Firstly, we point out the need for a broad debate on economic policy. We no longer accept the ban on debate, which consists of limiting it to the framework of neoliberalism. We believe it is important that Brazilian society understands the alternatives for economic policy. Secondly, we criticize the government's economic policy.
JU—What is the criticism?
Pliny—This policy is a continuation of the FHC government's policy, which leads the country to a dead end. It's a recessive trap that we won't be able to get out of. This economic policy ties the country to the logic of trade surplus and fiscal surplus. And within this logic, you have no space to think about an employment and national development policy. Therefore, we present general guidelines for an alternative economic policy.
JU—What alternatives are these?
Pliny—We have listed a set of essential measures for the government to gain control over economic policy. Some kind of control over the movement of capital. We do not discuss what type of control, but we affirm that without greater control over the movement of capital, Brazil has no room for maneuver for an alternative policy. The main element of destabilization of the Brazilian economy is the extremely high capacity for capital movement. It is necessary to have some control over the entry and exit of capital and regulate this. It is necessary to impose conditions so that this movement does not remain exclusively at the whim of private interests. We also have to have a policy to reduce the fiscal surplus. When the economy goes into depression, the government has to make public expenditures. We are doing the opposite. The economy has a strong recessive trend and the authorities are increasing real interest rates and the fiscal surplus.
JU—What kind of consequences could this policy bring to the country?
Pliny—In the short term, we are going to see a recessionary dip, which is already underway and all indicators indicate that it is likely to become more accentuated. In the medium and long term it is difficult to predict, but the government's card leaves it in the following situation: firstly, there is no guarantee that the government's effort to regain the trust of the international community will bring a normalization of capital flows to Brazil. The government can carry out all the services required by international banks and not receive compensation. In this context, the country would be heading towards a situation of impasse like Argentina. The second alternative is for capital to return, giving additional impetus to the neoliberal model, but without avoiding the consequences of this pattern of accumulation, which are prosperity for the few and poverty and unemployment for the many.
JU—A survey released by IBGE in April revealed a drop in industrial production in nine of the 12 states surveyed. Could this already be a sign that things are not going as expected?
Pliny—The Lula government radicalized the economic policy of the FHC government. He intensified fiscal tightening and monetary tightening. The deepening of the recession is a reflection of this policy. Brazil was already practically stagnant. What we are seeing now is a change in level, with an even greater depression in the economy. There is no doubt that this is a reflection of stratospheric real interest rates and a very truculent fiscal surplus policy. But the worst of this policy is yet to come. The government proposes reforms that will reinforce the institutional armor that ties the country to neoliberalism.
JU—Do you talk about tax and pension reforms?
Pliny—Tax and pension reform, independence of the Central Bank and a reform that runs in parallel, which is the FTAA agreement. In addition to the others that are being prepared, including the change in bankruptcy law, the CLT, etc...
JU—In relation to the tax reform proposed by the government, what are the risks it poses and the chances of it succeeding?
Pliny—First of all, it is a timid reform. In a way, it institutionalizes all the fiscal casuistries of the FHC era. So, the objective is to institutionalize the tax squeeze. Another objective is to minimize the fiscal war by standardizing the ICMS. In theory, this is not bad, but it is absolutely insufficient to end the fiscal war and federative conflicts. A third objective is to relieve exports.
JU—What about pension reform?
Plínio—For states and municipalities, this reform means a fiscal adjustment. For the federal government, it is a privatization of public pensions. This is a big deal, superior to the privatizations of the FHC government. It has already been said that this reform is a kind of Robin Hood in reverse because you take from the middle class, from the middle class, to give to the banker. The debate on reform is very much at a standstill. The reality is that pension reform is an exemplary case of socialization of losses and privatization of benefits. The population will lose a lot from this.
JU—In what way?
Pliny—You lose because you attack the public servant, the human material of the state. And by doing so, you degrade the Brazilian State. This is an anti-constitutional, anti-national and anti-employment reform, because if you leave someone working for longer, you are taking a job away from another worker. In a situation of structural employment crisis, it is a reform that goes against what should be done.
JU—Responding to this type of criticism, President Lula said on June 17, in Pelotas, that he could not accept a sugarcane cutter working until the age of 60 while a university professor retires at 53.
Pliny—I think that, instead of making university professors retire at 60, he should allow sugarcane cutters to retire at 53. Because to create an employment policy in the modern world you have to socialize occupations. This is done by reducing the working day and the length of a person's working life. He did some dumb math, because he's leveling for the worst. He was elected to improve everyone's situation, not make it worse. I think that if the country's situation required sacrifice from the middle class to improve the situation of the lower classes, then it would be a valid sacrifice. The problem is that the government is wanting a sacrifice from the middle class to make bankers even fatter. This is unacceptable.
JU—What about the proposed independence of the Central Bank?
Pliny—This is a very important reform but the population has no idea what it means. The Central Bank is the headquarters of capitalism. Granting independence to the Central Bank means cementing the control that financial capital already has over it. In practice, this means that the exchange rate, credit and interest policy will be based on the interests of creditors. The independence of the Central Bank in practice means a renunciation of the possibility of the Brazilian state making economic policy and driving national development. This is very serious. The population thinks it is just a technical measure, but in fact it is a political measure with lasting consequences. All Central Bank decisions are political in nature, in the sense that they benefit and harm certain interests.
JU—How does this happen?
Pliny—For example, by devaluing or appreciating the exchange rate, the Central Bank will be harming some and benefiting others. The same goes for increasing or reducing interest rates. All measures involve interests. There are no exclusively technical measures. The independence of the Central Bank means that the Brazilian people will no longer have a voice in defining exchange rates, interest rates and credit.
To be continued ...
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