Whatever happened to Brazil?
The age of dumb money and dumb politics
14 August 2019
“One of man’s oldest exercises in moral
philosophy is the search
for a superior moral justification for selfishness.” J.K. Galbraith
Abstract: Under Lula and Dilma, during the 2003-2013 decade that the World Bank called “the Golden Decade of Brazil”, we had simultaneously economic growth, social inclusion, environment protection and job expansion. With no deficit and very low inflation, and all in spite of the turbulence of the 2008 crisis. Presently Dilma has been ousted, and Lula is in jail. No crime was ever proved against either. Starting in 2014, when the old oligarchies took over, the economy is stalled, unemployment has doubled, the Amazon is being cut down, child mortality is growing. They took power through an ill-disguised coup, and have been pushing recessive policies on all fronts, in the name of “sound and responsible economics”. And, of course, also in the name of God, family values, tradition and fatherland. In the present paper we draw up the main lines of how good politics went down the drain.
It seems that when power gets dumb, not a little dumb as is usually the case, but downright dumb, it tends to cling to its path, unable to put the brakes. The amount of perpetrated idiocies or tragedies, from a certain point on, would demand such broad confession of incompetence, that those in power continue to muddle on until they reach a complete disaster. Admitting that the clamorous protests they have been fending off were ultimately justified, is just too painful. Barbara Tuchman gives us a precious analysis of this mechanism, which she called The March of Folly. “Once a policy was adopted and implemented, all subsequent activity is transformed into an effort to justify it.” This led, for example, five successive American presidents to stagnate in the Vietnam war, in spite of their intimate conviction that it was a lost cause. Political dumbness tends to generate an impressive power of inertia. (263)
Thus, any similarity with the right-wing coup in Brazil insistence on promoting a policy that pushes the country back, even after five years of disaster, is evidently not an exception, it is the rule. In the tunnel of folly, those who insist always imagine that the proverbial light will finally appear, a question of insisting a little more. If the adopted policy is generating sacrifice for the people, instead of solving their problems, it would mean the sacrifice was not sufficient. With gigantic efforts of the mass media oligopoly, fake-news on industrial scale and lots of money, we elected a president whose aim is precisely to accelerate the March. With God and the Family towards absurdity. Our effort to point the absurdities out in this paper is not negative: correcting errors may be more realistic than reaching for distant utopias. And Brazil, unfortunately, is not alone in this maze.
Austerity, for those who haven’t noticed, does not work. For a simple reason: capitalism, in order to expand, needs producers, but it also needs consumers. The central argument for austerity is that we do not have sufficient resources to include the poor. At least not in Brazil, where they are so many. Social policies and a decent minimum wage woud not fit the economy, the budget or the Constitution, depending on the politicians. But the numbers are simple: Brazil produces 1.7 trillion dollars of goods and services a year, the amount of our GDP. For a population of 210 million, this amounts to a per capita of US$ 8 thousand year, or US$2700 a month per four-member family. This is far from the consumption ambitions of our higher middle-class, of course, but for us common mortals quite sufficient for a decent life. Our problem is not the lack of resources, but rather the absurdity in its distribution. In fact, Brazil is very near the 10 thousand world per capita. The world produces quite enough, if reasonably distributed, for at least ensuring we get rid of hunger and other dramas that are making billions suffer.
During the Lula Government, economic growth was not only strong, but income of the poor majority grew faster than that of the rich: everybody gained, the poor proportionately more, which reduced inequality. The poor showing up in society generated the expected reaction from the rich: the same they had with Getúlio Vargas (ousted in 1954), with João Goulart (ousted in 1964), with Dilma Rousseff (ousted in 2016) and now with Lula, who only did not get elected in 2018 because he was emprisoned, two months before the election, on fabricated corruption charges. All of them had a go at reducing inequality, generating some economic democracy.
In Brazil, it seems we can only have democracy if we do not use it. When we did, things worked out quite well, but for a short time. Dark times and violent politics seem to be the rule, and for the deep power structure to see that what works is what they have always criticized is unbearable. Dumb times are back, and idiocy can be very resilient. Portugal has an interesting experience: they dispatched austerity, and things are working out. In Brazil, with and absurd law prohibiting expansion of public social investment for 20 years, we have written inequality into our legal system, thus changing the 1988 Constitution. The recommended austerity, obviously, is for the poor who already are deprived, and not for the rich, which is where the money is. Homo Sapiens?
A stupid coup
The World Bank called the Brazilian development experience from 2003 to 2013 The Golden Decade. One has to be very ideologically blind to ignore the huge progress represented by unemployment falling from 12% in 2002 to 4.8% in 2013, the creation of 18 million formal jobs, the 38 million taken out of poverty, the reduction of the Amazon rainforest destruction from 28 thousand square kilometers in 2002 to 4 thousand in 2010, the access to electricity for 15 million poor and so forth. A strong regular progress during 10 years represents sound policy, not just a temporary lucky set of events, what we in Brazil call a “chicken flight”. And it is a trend we must rescue, for we have some 150 million people who still need to improve their access to individual and collective goods and services. This is a huge oportunity to stimulate economic growth, a horizon to reach. Foreign trade may help, but it is not the solution, exports represent only 10% of our GDP. We are not an Asian tiger. The key problems and solutions are internal.
Mental confusion naturally makes it difficult to accept evidence when you want to to be convinced of the contrary. This confusion is fed and stimulated by a sophisticated form of organized rubbish we presently call a narrative. We were told that doing what is good for the people is populism, and that this populism brought our budget down. The image they created and have repeated ceaselessly, is that a good housewife only spends what she has. Dilma spent too much, so this housewife has to go home. “Send her back”, Trump supporters would call it.
But the numbers are simple: what generated the deficit were not the economic and social policies of the government, but the scorching interest rates on the public and private debt, the so-called financialization. In 2019, we have 62 million adults stalled in debt, unable to pay the interest, not to speak of reducing their debt, and blacklisted by Serasa-Experian, the US based corporation which controls credit information in Brazil. They are 62 million adults in a 210 million inhabitant country, add in the children, and we are speaking of more than 40% of the population. This is not a housewife spending too much, it is the banks earning far too much.
When Dilma tried to reduce interest rates in 2012 and 2013, war was declared on her by the banks, as well as the rent-earning high and upper-middle-class. Just for the record, the interest rates she tried to reduce were 44% average for business, 88% for private persons, and 14% for government bonds, while the inflation was around 5%. This is technically usury. They were bleeding the economy at a very accelerated pace. No economy can work with this kind of interest rates. But depriving the rentiers of this enormous flow of easy money was politically unsustainable. Nothing very new for whoever read Michael Hudson’s Killing the Host or the Roosevelt Institute studies on The High Cost of High Finance.
From mid-2013 on, there is no more government, only boycott and political chaos. Dilma still got reelected in 2014 but, as was declared by the losing right-wing party, if she won she would not govern. Taking over, the first things they did was raising interest rates still more and creating a 20-year legal ceiling of investment in social policies. The money not spent on health, education and the like was redirected interest transfers to banks and the rent-earning class. The economy was thrown into recession, but some one had to take the blame, and, surprise, it would be the woman. The scapegoat system is a tradition in politics.
They ousted Dilma without a crime, jailed Lula without proof of guilt, and elected a sinister far-right candidate precisely because the candidate who was going to win was put in jail. The judge who had him jailed gained the post of minister of justice. In 2019, Intercept recordings published by Glenn Greenwald gave us a full picture of the conspiracy. The fact is that the judge and the prosecutor worked hand in hand against Lula and his lawyers, and when the Supreme Court thought of intervening, a general cowed it into silence. The whole setup is being exposed in the international press, and critized by judges throughout the world. The fact is that Lula is a political prisoner. When he left his 8-year of presidency in 2010 his approval rate was 87%.
The political dimension is obviously linked to the economic results. If the new group which organized the coup had been able to maintain the economic growth, things would probably have worked out. But they resorted to the very traditional recipe which had stalled development during the previous decade, with Fernando Henrique Cardoso: privatizations, high interest rates, reduction of environmental and social regulation. The economy suffered a 3.5% recession in 2015, 3.8% in 2016, and has been stalled ever since, forcast for 2019 being below 0.8% by the optimistic IMF. It is the fifth year they are “fixing” the economy. This is simply not working. And the more they become aware of it, the more they explain the sacrifice was not sufficient.
But the narrative keeps rooted, because it is simple and gives the populace someone to blame: Dilma broke the economy. The president being a woman helps the narrative. It is a farce. Deficit during the Lula and Dilma period (2003-2013) was never significative, even including the interest rates on public debt. But for so many people, particularly when they do not understand the real process, politics is centered on emotional reactions. The financial system broke the economy, but did give people someone to blame, a woman, and a stubborn and ouspoken one, the ideal victim. The power of banks works today only for bankers and rent-seekers. In the line of an American quip, we can say our problem is that a minority who earns half a million a month have convinced the groups earning 50 thousand a month that our problem is the guy who earns a thousand reais month. Beautiful narrative.
Those who are sorry for having helped to break legality in the country are presently called ‘widows’ of the coup. They opened the doors to the absurdity we presently have to cope with, reinforcing economic dumbness through political idiocy. Elementary common sense shows that what works is effective representativity, in the line of the first article of our Constitution: “All power stems from the people”. In a fundamental sense, that of effective respresentation, the newly elected government is not legitimate. We elected a far-right moron because the legitimate candidate who was going to win was jailed, because the big media created an anti-PT hatred movement, because they organized an industrial-scale fake news campaign, and because a criminal attempt on his life granted him a victim aura, besides saving him from what would have been humiliating presentation of his political views on TV debates.
It is not a question of accepting or not the result of an election, but of understanding that his representativity is very limited: imagining we can generate sustainable development based on far-right sectarian political power makes no sense. To survive with a very narrow internal support structure, this group had to seek support of the Trump administration and foreign corporations, and is opening the doors to predatory national and international interests in the Amazon forest, oils reserves, deregulated agrotoxic agriculture and so on. Internally, its survival rests on the promotion of hate against “the enemy”, chosen with anticipation as guilty of the poor results of the government. Hate and violence tend to be the natural road-fellows of elitist policies. Incompetence is always on the lookout for whom to blame.
Profit we earn on productive investment is quite legitimate: it generates jobs, goods and services, and pays taxes. Profit on speculative investment, on the other hand, generates dividends and huge returns without any productive contribution. Bankers call the different papers we can invest in “financial products”, and they love to call themselves “financial industry”, except they do not not generate products and are not industrial. Pure cosmetics. Money earned from financial speculation will not put one more pair of shoes on the market of real goods. Making the difference between productive investment and financial allocation is basic. No trouble with the distinction in French, “investissements” and “allocations financières”, or even in Portuguese, “investimento” and “aplicações financeiras”.
The British handbook on how money works, edited by Kathryn Hennessy, explains the financial snow-ball efect: financial papers have been yielding roughly between 7% and 9% a year during the last decades. Whereas effective production of goods and services, which demands more tiring work, has been growing at an incomparably slower pace, on the order of 2% do 2.5% a year. Those who have spare money will obviously put it where it grows better. For example, a billionaire locating his money in papers paying modest 5% a year, is earning 137 thousand dollars a day, without having to produce anything. And every day a part of this rent is making the snow-ball bigger, generating non-productive ever accelerating wealth.
The result is we will have more billionaires while the real economy is deprived of the necessary financial resources. This is capitalism shooting its own foot, slowing down economic growth and reducing its basic legitimacy. From crisis to crisis, in the world financial cassino, we have seen the richest 1% of the planet accumulate more wealth than the remaining 99%. When speculative invesment yields more than productive effort, the process becomes systemically disfunctional. Quite obvious and well explained in Thomas Piketty’s studies. And nothing new for finance researchers such as Paul Dembinski and Alain Shoenenberger, who wrote in 1993, 25 years ago: “The financing of production and trade is a matter of purely marginal concern to financial markets. Instead, they are chiefly concerned with managing previously accumulated wealth. It is only a slight exaggeration to state tha a society of producers is gradually making way (at least in peolple’s imagination) for a society of interest-earners.”
Market economy was supposed to facilitate exchange between producers and consumers, while generating products, employment and income. Nowadays the “markets”, a limited group of speculators, show a surge of optimism whenever the population loses rights. It is the logic of folly. We do not have to go very far to learn something positive: China controls its financial system so that money is productively invested, the Germans rely on their local banks (sparrkassen), ensuring that money is invested in what the community needs, the Nordic countries have decentralized financial systems, just to mention o few. We know what works: it is when money is productively invested.
A practical example may help: a few years ago, South Korea invested public money in a large project of non-polluting public transportation. The investment generated a series of technological innovation and production intiatives, thus creating employment. Since public transportation is energetically and financially much more efficient than filling the cities with cars, the investment was paid back. Pollution was reduced both by the electric engine technology and the reduction of use of individual transportation. Less pollution in the cities means less money spent on hospitals and other health costs. The reduction of the time lost in transportation means people are less tired, and have more time for leisure, as well and improved productivity. The example only illustrates the obvious, which is that our resources should be invested in projects and programs that have multiplying effects in terms of stimulating the economy, protecting environment and improving the well-being of families. So much intelligence is wasted in searching more sophisticated financial mechanisms, which could be invested in creating socially and economically useful projects. Making society wealthier is what works.
The integrated financial flow
How does this work in Brazil? The numbers are not difficult to grasp, we just have to put them together. The economy works when you put the money where it multiplies. If we take a loan to buy some kind of equipment, improving productivity, and thus profit, at a rate that is higher than the interest rates we have to pay, we can continue buying more equipment, generating more products, employment and income. But if the cost of credit is higher than the generated income, we will drown in successive loan renegotiations, ending up working for the bank. As Zygmunt Bauman writes, bankers hate good payers. This fundamental deformation hits the main economic actors – families, businesses and the state – which become tied to a process of permanently feeding the financial intermediaries. Herein lies the mechanism which generated our economic recession and the ensuing political chaos we are living in. But our leaders seem convinced that the solution is to put more bankers in charge of politics.
Let us get to the numbers. In Brazil families and businesses spend 1 trillion reais a year just on interest, without reducing the debt, just rolling it over. Considering our GDP in 2017 was 6.3 trillion reais, we are speaking of 16% of GDP. This surrealistic amount is simply due to the huge interest rates we pay, technically speaking constituting usury. In February 2018, for example, banking interest rates for families was on average 137%, when in France they are below 5% a year. Thus, the financial system drained the purchasing power of families and the investment capacity of businesses.
Both our savings and the flow of interest on families and legal persons generate earnings for financial intermediaires, which are in great part invested in public debt papers. Government has to pay interest on this debt, basically to banks, institutional investors and rich individuals, over 300 billion reais a year, roughly equivalent to 6% of GDP, 20% of the public budget. At about 75% of GDP, our public debt is not particularly high, but has been paying very high interest. Thus, our taxes, instead of financing infrastructure and public social policies, end up in the pockets of financial speculators, people who do not produce anything, on the contrary, extract resources which could have been productively invested.
The numbers are not complicated. If we put together the 16% they take from families and businesses and the 6% they appropriate from ou taxes, we are speaking of 22% of GDP. A very small parte of this return to the real economy. In the absence of Brazilian figures, we can imagine it will be less than the 10% Epstein and Montecino estimated for the US financial flow. This is obviously an unsustainable drain on the productive economy. But the negative impact is amplified by the tax system. While in Europe the deformation is partly corrected through taxes on financial capital, fortunes, inheritance and high income, in Brazil the rich pay proportionately much less than the poor, and since 1995 distributed profits and dividends are exempted. And there is more. Tax evasion for 2018 was estimated at 620 billion reais, 9% of GDP (Sinprofaz). Tax on salaries is deducted at the source, and there is no way for the poor to escape indirect taxes, so tax evasion concerns basically the rich. The process is technically supported by banks, which have specialized departments for what they call “tax optimization”. The names used in finance are very good, such as precisely calling any financial speculation “investment”.
And there is more, of course. A great part of tax evasion relies on tax havens, with so many asset management groups located in Panama, Cayman Islands, or the Delaware in the US. And we have Switzerland, which, as Jean Ziegler wrote, “lave plus blanc”, offers superior laundering. The fact is that the stock of unproductive financial resources in tax havens is estimated at 20 trillion dollars by the Economist, more than a quarter of 2012 world GDP of 73 trillion. The Brazilian participation in this amount, according to Tax Justice Network, is around 520 billion dollars, which represents roughly 28% of GDP. Not only do they not invest, but do not pay taxes.
What we see here is an impressive dimension of financial drains on the economy. But we also have a series of smaller drains, such as the complementary pension funds, which with assets corresponding to around 15% of Brazilian GDP could obviously be used to invest in economic and social development instead of feeding on financial speculation. It is also the case of the insurance industry, with assets also corresponding to 15% of GDP (1 trillion reais), in great part located in public debt papers. Rent-seeking also is characteristic in a diversity of sectors, such as private health schemes, comunication over-pricing, big pharma patent manipulation and so on.
Our 1988 Constitution stated clearly that “the national financial system will be structured so as to promote the balanced development of the country and to serve the interests of the colectivity.” Nowadays, the system is essentially used to channel money to the unproductive, whether they be bankers, national or international corporations, or the rich who have even managed to demonstrate on the symbolic Paulista Avenue in São Paulo, wearing national colors in support of the far-right government. The truth is that banks have created a system through which our taxes are channeled in great part to unproductive rentiers. The bankers are presently in charge of government, drain its resources, and proclaim that the reason we are suffering is that the State is too big, taxes too high, and the poor irresponsibly favoured by social policies.
The absurdity of all this? Well, it would be incomparably more productive for all of us, and quite comfortable for banks, if they provided funds for the economy instead of draining it. China reached this development capacity because they channel financial resources to productive use. In our case, short term greedy attitudes consisting in playing around with papers or having money grow in tax havens generated the present recession (2015 and 2016) and keeps the economy stalled. How come we study every detail of the produtivity of every hectare in agriculture, or the productivity of each industrial worker, but never have a look at the social productivity of financial resources?
The dumbness of inequality
Mainting this degree of inequality is particularly absurd, but it is central in the present administration policy. After all, the rich groups in power defend their interests, and we seldom have anyone in powerful positions who is not rich, white, man, and concentrated on improving his already impressive advantages. The question is, of course, that from a certain level of inequality and divorce between access to wealth and productive contribution, the system tends to become disfunctional. Merit has to play a role, even for the happy few. They threw the economy into recession, unemployment and political chaos. Who is this working for?
Does it work for the rich? Raising families in absurd closed condominiums, or in mansions where they have to live with security teams, protect themselves in armored vehicles, hiding their fortunes in tax havens, managing tax evasion schemes, and finding comfort and relaxing in developed countries – civilization at last – all this has little in common with as society where you breathe freely. Inumerous international comparative studies on quality of life perception show a radical quality of life improvement when a poor person has acces to decent income, but practically no improvement when a millionaire gets more millions. Not even for them does this system work. If we are to improve our overall feeling of happiness, there is no doubt that inclusion policies work better for everyone. When more money flows to the bottom of the social pyramid, we generate more happiness and more economic activity. Reducing inequality has strong impacts in ethical terms, as well as political and economic ones.
In ethical terms, it is difficult to find words that would be strong enough. In no civilized society could a person have no access to basic health service, a child or an adult have no food, families without shelter or spending years in refugee camps. Multidimensional poverty now hits 1.3 billion people, half of them, 663 million children, ands 428 million of these under 10 years of age. (UNDP/OPHI) Is this poverty their fault? Lack of initiative? We must stop the bulshit, the rich, not the poor, created this absurdity. Almost a billion people, and growing, are going hungry, while we produce more than one kilo of grain per person per day, and a third of the food we produce is lost by mismanagement.
All these irresponsibly rich drain our resources for ostensive consumerism or financial speculation, instead of helping to implement policies that work for the whole of society. All these corporations which generate social, economic and environmental tragedies, navigate proclaiming values no primate would accept, and whose ethics consist in grabbing a bigger piece, no matter the suffering, damn the planet. What we have here is impressive intelligence in getting to the means, and stunning idiocy in defining the ends. Should we build taller walls to contain the poor, organize more cocoons for the rich, develop more violent and constraining repression systems?
This inequality is evidently also disfunctional in social and political terms. From a certain level of inequality on, there is no room for social solidarity or democratic conviviality. Violence tends to contaminate all domains. In the US people buy more guns, in Brazil the army invades favelas and the police kills an average 14 persons a day. Well, we have no death penalty in Brazil. Europeans do not know what more to invent to protect themselves from migrants fleeing the colonies Europe had so violently exploited. We are not speaking of perfect iquality here, but of a little less obscene scenario, where every person could be valued as a human being, and have opportunities to thrive and contribute. Reality is very simple here: when people are placed in desperate situations, they react desperately. There is a limit to good behaviour by millions who find all the doors closed. We have the resources, we have the technology, we know what has to be done, and it costs very little. The 2030 Agenda is here for everyone to see. Is it exageration to speak of ignorance?
And inequality is particularly dumb from the economic point of view. We all know how the New Deal worked in the US, how the Welfare State brought prosperity to so many presently rich countries, we have all the data of the South Korean miracle, of the impressive rythm of development in China, of the Golden Decade 2003-2013 in Brazil. All these experiences have in common the expansion of purchasing power of the population in general, access to universal free public social policies, all of which stimulated production and employment. Entrepreneurs do not need Chicago Boys economic ideology, they need people with purchasing power for their products, and cheap credit to invest.
The mechanism is well known since almost a century ago, with Kalecki and Keynes. But it is basically common sense. Investing in the well being of the population stimulates demand, which in its turn generates more production, ensures more jobs which generate more demand. Family consumption and business production generate more taxes which puts back into government whatever was spent to stimulate the inclusion programs. And a population with access to social policies, with more health and education, is simply more productive, besides being more satisfied with life. Here we do not need ideology and hatred, or scapegoats, but a simple look at the experiences that have worked and are working today in many places. Basically, what works in economics is when the economy is directly oriented according to the priorities of family well being. Inequality, in economic terms, only maintains a narrow space of activity and low social productivity.
Maintaining and reproducing inequality, when it desorganizes our societies in ethical, political and economic terms, is deeply dumb. Increasing inequality, as we are doing throughout the world but particularly in the US and in Brazil, is in the sphere of pathology. All the positive examples we have, from Canada to South Korea, in Germany and in Nordic Countries, and of course in China, are based on the expansion of internal market and social policies, instead of generating privilege for the few.
The state, business and civil society
At the center of our challenges is the necessity of redefining our institutions so that we can implement policies that make sense. New Rules for the 21st Century, the Roosevelt Institute called it. The debate over politics has mainly been centered on the war between those who want to privatize and those who would have a more active government. The reality is that we presently are too complex societies for this kind of simplifications to work. Where they do work, effective policies are based on a reasonably balanced intervention of the state, business and civil society. Corporations without public interest restrictions turn to mafia, the state without public control tends to become dictatorship, while public interest without civil society organizations strong enough to face both corporations and the state tends to be over-run. There is no Santa Claus in politics.
But it is not complicated. The overall objective is sustainable development, balancing economic, social and environmental interests. Nowadays the 17 goals and 169 objectives of the 2030 Agenda clearly describe where we should be headed: ensuring a decent life far all, without screwing the next generations. And we know what works: it consists in orienting the complete economic cycle towards the well-being of families. This, after all, is what we mean when we speak of economic and social sustainable development. It certainly depends in first of all on our direct income, the pocket money we earn, which allows us to pay our bills. Ensuring a reasonable income for all consumers will in turn generate demand, stimulating productive activities. Both direct consumer activity and business production generate taxes for the public dimension of development.
Government will in turn be able to use these resources to what has been called undirect salary, which allows us to have access to collective consumer goods and services such as health, education, culture, security, a clean river, parks in the city, energy and transportation infrastructures and the like. Access to collective consumption is fundamental, for it is much cheaper and much more efficient to have a free public universal access to health services such as in Canada, then facing the dominantly privatized American out-of-pocket system. The numbers are glaring: an American spends 9,400 dollars a year on health services, while the Canadian system, costing 3,400 dollars per capita, presents much better final results. Not to speak of the reduction of anxiety when you live in a country where you know you will not be unable to pay medicine for your kid.
Public, universal and free access to some basic social services is simple more efficient, and hugely important for the reduction of people’s anxiety, one of our chief social scourges. It is ridiculous to call public social investment “expenditures” when we are speaking of the most efficient way of ensuring access to essencial public consumption services. In the strange way we put names on things, the papers bankers push us to purchase are called “financial products” and “investment”, while health and education are classified as “costs”, when they constitute very efficient investments in human capital.
The dumb attitude here consists in maintaining an ideological war between pro- or anti-state attitudes, when it is natural that individual consumption goods be managed in the private sector, social policies and infrastructures in the public realm, and the trade-off and coordination between both areas be insured by vigorous civil society organizations. Democracy limited to a vote every few years is fake democracy. Instead of stupid macho declarations against the “nanny-state” and other idiocies, we need common sense, and a good look at countries where things are working. The best remedy for dumbness is information, it is much more effective than slogans.
An informed society
We learned from Jung that thinking is a laborious activity, so people would rather have opinions. We obviously have a right to our opinions, but not to our facts, but it seems not to matter very much. What is impressive is that we have so desinformed a society when we are awash in means of communication, at home, in the street, in any waiting room, in our pocket. In good part, this desinfomation is due to the fact that if we have to chose between facts which reach our brain and the opinions which reach our guts, we clearly prefer to be in peace with our guts. We rationally select the facts, or deform them, in order to justify what we want to believe. Demagogues throughout the world have learned that mobilizing people through hate is much more efficient than trying to explain complex reality. Finding a culprit we may collectively hate generates a powerful popular catharsis, an immense excitement of belonging to a punitive gang: KKK, Hitler and the jews, Palestinians in Israel, Mexicans in the US (Fidel and Hussein are gone), imigrants in Europe. In Brazil we have even reinvented comunism in order to justify the hate of Lula, and the of poor in general.
Kurt Anderson writes that the United States suffered a mutation that transformed the country into a Fantasyland: “Among the one billion websites, believers in anything and everything can find thousands of fellow fantasists, who share their beliefs, with collages of facts and “facts” to back them up. Before the internet, crackpots were mostly isolated and surely had a harder time remaining convinced of their alternate realities. Now their devoutly believed opinions are all over the airwaves and the Web, just like actual news. Now all fantasies look real.”
Political demagogues with their hate speach or flattering patriotism, corporations that convince us we are more important if we pay 300 dollars for a Montblanc fountainpen (it writes), Think Tanks that are mushrooming everywhere – from the giants financed by the Koch brothers to our modest Millenium imitation in Brazil – oil and coal giants funding fake science to convince us that climate change is fake science, all this points not only to the fact that we are very fragile in terms of how we use reason, but that we have a gigantic planetary opinion building industry to make a profit on it.
From 2013 on, the Globo communications empire orchestrated an impressive anti-corruption theatre, a show every night, featuring the last corrupto, suggesting the hidden links to Lula. A fake-news industry, managed by marketing corporations, created the deep political polarization we presently know to have been very similar to what was organized for Brexit or for Trump. The Brazilian novelas became politics. Instead of information, we now have ”narratives”, and a huge manipulation industry.
Our brain becomes an instrument to invent reasons to believe in what has no rational basis whatsoever. Having such an uninformed society, in a context of huge information overload, points to the particularly dumb way we organize access to knowledge. And we do not lack positive examples, such as the BBC for the English-speaking world, a TV5Monde for the French, PBS in the US and the like. We have made a technological information revolution and use it to create fakereality.
The technology paradox
It is impressive that we have to worry about the advance of technology. After all, being able to do more with less effort should make us glad, we improve social productivity. But the explosive tecnological change we are living with demand innovative forms of regulation and social organization. In the grab-all world we curiously call neoliberalism, the new technologies lead us to overfish our oceans, to fill our food with chemicals, to contaminate water, air and soil, to transform climate, destroy our forests, drastically reduce biodiversity – all on unprecedented scales, precisely because of the power of technology. The expanded creativity new technologies permit become dangerous when we have such a difficulty in thinking systemically, of how the diverse transformations form new synergies. The research by Wallace-Wells, The Uninhabitable Earth, helps in understanding this challenge.
But we also have an impressive difficulty in looking at the long term. It is impressive that the 2008 crisis seems like yesterday, while 2030, an equal distance in years, seems lost in the future. Not to speak of distant 2050 or mythical 2100. And yet, my newly born grand-child Leonardo will be 31 in 2050, and in 2100 will have the age of the professor who is writing these lines. The future is right ahead, and coming fast. We are living a slow-motion catastrophe, reading our future in scientific research papers as in the last pages of One Hundred Years of Solitude.
It is obviously a question of radically improved governance. Why should we worry so much with technological unemployment when the improved productivity means we could work less, and dedicate mor time of our lives to culture, leisure and conviviality? We can better organize our working schedules, let the economy expand in areas which will allow us to better enjoy our lives, and ensure universal basic income so that in the transition no one is reduced to a desperate situation. But most of all we have to generate regulation and governance capacity so that we do not destroy our planet. Our recently elected government has opened a free-for-all policy concerning the destruction of the Amazon forest, even producing an impressive propaganda documentary on how we must claim the right to exploit our resources. And our minister of foreign affairs attributes the climate challenge to a “marxist conspiracy”.
In other words, looking at the expanding technological capacity, we have to ensure the overall result is economically sound, but also socially just and environmentally sustainable. The free-for-all battle-field we generously call ‘markets’, inherited from the XXº century, but with XXIº century technologies, is a disaster. Using so much technology and knowledge to deepen the environmental and social and economic crisis, frankly, is systemic idiocy.
Competition or collaboration
We know collaboration works. But instead, we wage war among all of us, between social groups, religions, countries, corporations, neighbours. In a great measure, obviously, it belongs to our nature. Chimpanzees are different from bonobos, and so are we. But the essential thing is that we can see, in so many examples throughout the world, that it is also a matter of institutions. It was not in the nature of the german to kill people in concentration camps, nor is it the case with american frontier guards who children apart from their mothers. And we can see how societies much more centered on collaboration, like Canada or the Nordic countries, are prospering not only in terms of quality of life but also of economic productivity. And persons forget, when they look at the impressive rythm of transformation in China, Vitenam or other “tigers”, at what point this is anchored in their collaborative traditions built on the rice planting culture, where the water resources must be shared, where transplanting is a collective culture, with chanting and all.
What is important in this short life of ours is not only the result, but also the process. Transforming life into hell and then showing increased production leads us to think, after all, what is it we want? Life is the walk itself, and turning the path less thorny can be more important than getting there faster. People are rediscovering common good, such as knowledge, environment, infrastructures that generate a more comfortable life and harmonious links between the different types of activities. With world urbanization, many cities are taking over, seeking a more balanced development, organizing collaboration between the different economic and social stakeholders. With evolution towards a knowledge society, we are discovering the obvious, that ideas can be freely shared without additional costs, in the framework of the zero-marginal cost society so well described by Jeremy Rifkin. With planetary connectivity we have new immense sphere of collaboration opening up, something Hazel Henderson has shown so well in her Building a Win-Win World.
It is high time we get a little more civilized. A simple verse by a Pernambuco popular poet is full of wisdom: “Where at are we all rushing to, why so much greed, if nobody came here to stay?” Frankly, all those super executives, whether politicians, entrepreneurs or religious leaders, get us tired, we prefer the peace of everyday life, the pleasure of social exchanges, the joys of conviviality. And we have all the science and wealth necessary to ensure well-being for all without so much ideology of individual success. It is good to succeed, of course, but not by only rushing through life, pushing people around, creating human and environmental dramas, even killing people as is happening in so many regions. When the rules become flexible and the laws adjustable to the strongest, we all become anxious or insecure. And fear generates hate. Is this necessary? Until when will we accept the stupidity of selling more arms to more people in the name of security, a Trump policy now being promoted in Brazil? Of sending the army to favelas instead of facing the absurdity of their existence? Is it demanding too much from intelligence to understand that it is more productive to act upon the causes than the consequences?
The law as a vector of injustice
Legality is fundamental. The set of laws defines the rules of the game in society. And equality in the face of the law is essencial, allowing us to have a feeling of previsibility and security in our lives. A central problem, of course, is the question of who makes the laws. In the really-existing society, laws are made by men, and not coincidentally white and rich. And, as could be expected, they tend to privilege men, white and rich. There was a time it was legal for a person to buy another person as a slave. Lincoln, as president, managed to change this law through a series of illegalities, including corruption. It has been commented that the greatest humanitarian progress in the United States was attained by a deeply ethical person through very dishonest means. In Brazil, the habit of legislating in one’s own interest leads us to chaos, eroding the legitimacy of law and even the judiciary system as a whole.
Our recent legal transformations are very significative. We can say the Constitution of 1988, the way it was negotiated, was legitimate. But even within this legal framework, we have transformed it into a Frankenstein. Follow the process. In 1988, we approved a new constitution, after years of military dictatorship, reaching a certain level of civilized governance. In 1995, government sanctioned a law that defined the modalities of public debt: as of July 1996, banks would be able to invest our money in public debt bonds, paying an astounding 25%, already with low inflation. Normal earnings on public debt is usually in the 0.5% to 2% a year brackett. It was called the Selic rate, and was, as it continues to be, a huge present to bankers. This is a legal form of taking over public money. Well, the law is the same for everybody, so the poor, if they had money, could also profit from the opportunity. The fortunes thus earned by the wealthy were also exempted from taxes: in a christmas present on the 26th of December 1995, distributed profits and dividends would not pay taxes. The bank employees pay their taxes already deduced from their salaries, but the millions going into bankers’ pockets are exempt. This is one more Brazilian originality. And it is in the law.
There is more. In 1997 government sanctioned a law authorizing legal persons to finance political candidates. With this corporate funding of elections, public administration became prisoner to the major clusters of economic power, such as the agri-business, main banks and so on. It took 18 years, at the end of 2015, for the Supreme Court, guardian of our constitution, to notice that the first article, which states that ”all power stems from the people”, no the corporations, had been violated. But these 18 years were sufficient to deeply change the political landscape. Congress elected with corporate money eliminated article 192º from the Constitution, in 2003, and interest rates, which had been limited to 12% plus inflation, were now free to reach usury level. Financial regulation ceased to exist.
Lula was perfectly aware of the power balance in the country and read, in June 2002, what was called a Letter to Brazilians, which could easily have been called a letter to bankers: he would not mess with their interests. In fact, with the elimination of Article 192º that had drawn up the legal framewort of the national financial system, he would anyway have little legal capacity to regulate private banking activity. In spite of the economy bleeding with the absurd interest rates, impressive results were attained, as we have seen.
But in 2012, with more than 50 million adults unable to pay their debts, businesses facing reduced demand and high interest rates, and government hampered by the public debt drain, Dilma decided to reduce the financial drain, mainly using public banks and the official public debt rate, by reducing interest rates. This drastically reduced the huge financial profits made by banks, institutional investors and the higher-middle-class. She did not have the strength to face the political backlash. We know what followed: boycott, street movements, and the coup. Formally Dilma is ousted in 2016, but in fact, from mid-2013 on, there is no government, just chaos. Vice-president Temer, who actively supported the coup, changed the Constitution so that social policies would be freezed for 20 years. But the transfer of interest on the public debt would be raised again. In mid-2019, as we write this paper, 62 million adults are unable to pay their debts. Just to remind the reader of the proportions of the usury system, bank credit for families paid 88% in March 2013, and 117% in June 2019. Loans for legal persons rose from absurd 44% to 52% in the same period. Inflation is roughly 4%.
Moral of this sport: speaking of legality became a make-belief exercise. In a small book in 2015, Os Estranhos Caminhos do nosso Dinheiro, the strange paths our money follows, we describe how large-scale corruption creates its own legality. A corporation paying a politician to vote for a certain law is a case of coruption. But between 1997 and 2015, paying a politician to get elected, thus having his votes in the corporation’s pocket for four years, was declared legal, much as the system created in the US in 2010. You only are forbidden to purchase a politician in retail operations.
We do have a basic legal framework, what remains of the 1988 Constitution. And a guardian to make sure it is respected, the Supreme Court. By abandoning legality and supporting the coup, giving an appearance of “legal process” to right-wing putchists, the judiciary facilitated a radical shift to the right, and opened the way to the dramas we presently face, with radical reduction of democratic space. Can anyone trust our politicized judiciary system? What they managed, is a deep demoralization, and the loss of confidence in justice represents a huge loss of institutional capacity in the country. In 2018, the Supreme Court, after justifying the loss of basic rights by the population in general in the name of preserving a balanced budget – the poor are too big for the budget – these same judges were granted impressive gains in salaries. We are facing the absurdity of the judiciary demoralizing justice. The costs for the country are immense, and much more than only financial.
We are back to the basic problem, our impressive dificulty in governing ourselves with a minimum of good sense. Political options continue being defined much more by our guts than by our brains, with hatred with much more space than solidarity and compassion. In fact, the truculence of groups and social classes that for some reason have become powerful seems to be a permanent part of our history, with systematic use of extreme forms of discrimination and violence. Any motive will do, whether it is skin colour, gender, sexual option, religion, income difference, and frequently even age. At times the length of your hair, a beard, or a veil are sufficient to feed the latent beast within us. And when bestiality can find a collective expression, and dresses up in moral superiority, hell breaks up.
Nowadays the communication system leads to our consciouness being invaded by the most absurd narratives, but usually favorable to dominant groups. Invading our intimacy is presently made possible on the individual level through electronic systems, and the control of what we see and interpret allows algorythms to manage public opinion on an industrial scale, as documented in The Age of Surveillance Capitalism by Shoshana Zuboff. Complex financial systems make us lose control over economic activities, generating absurd inequality in favour of unproductive rentiers. Giant corporations distribute their power over the planet, a power no one voted for, and not limited by any global governance. And we are moving very rapidly, in historical terms, towards destruction of life on the planet. The Uninhabitable Earth, by David Wallace-Wells, presents as we have seen an excellent overview of these bleak perspectives.
We do have strategic visions, and they are reasonable obvious: rescuing the public dimension of the state, taxing unproductive capital and more generally adapting our tax system to the new economic realities, generating transparency on financial flows, some kind of basic universal income, reduction of working-hours according to productivity gains, rescuing the role of cities as fundamental units of bottom-up public governance, and obviously creating a minimum of international governance in the face of the global chaos. And, of course, democratizing media so that we can have an informed society. Is this viable? The question is not one of viability, but of understanding, first of all, the essentially political dimension of our challenges, the centrality of the question of power. And we must understand that it is a question of time, for with climate change, destruction of biodiversity, the deepening gap between rich and poor, world-wide contamination of water and other growing challenges, we are just using a universal political “mañana”, probably until a planetary catastrophe generates the necessary political will.
The erosion of what little democracy we had in Brazil can be seen as a burlesque tragedy. We brought down policies that were working, we tore down a Constitution which was protecting us from absurdities, we elected a weak far-right demagogue with very limited political support and who can only survive by letting the oligarchy and international interests free to promote destructive policies. The man in charge of the economy, Paulo Ghuedes, is co-founder of BTG Pactual bank, that has 38 affiliates in the Cayman Islands, Bermudas, Panama, Delaware and other tax havens. Tax havens are used essentially for financial speculation, tax evasion and money laundering. Is this what we need? How come such a guy becomes minister of the economy?
Do we have some kind of deep conscience in Brazil, a mass of common sense in the heads of millions, which would allow us to get back on a constructive road? We divided the world into left and right. This is comfortable for the right, in that grabbing more resources for the already rich and destroying the environment can be presented as a legitimate political option, an appearance of legitimity, a question of “opinions”. In fact, the great divide is between those who seek a democratic and sustainable society, and those who try to grab more, and in the short term, no matter what happens to society and to nature. It is not a question of right and left, it is a question of elementary human decency. How long will we tolerate having 850 million going hungry in a world awash in food? And watching on TV as a band of idiots in Wall Street justify anything, chanting ‘Greed is Good”?
Paulo Freire once declared he wanted “a less evil society”. It seems childish. But our challenges are immense, and we, as teachers, communicators ou social organizers, or simple citizens, must face the task of explaining the obvious: a society which works has to be a society which works for everyone. Dumbness should be confronted, or faced, with what works, and that is intelligence.
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Ladislau Dowbor teaches economics at the Pontifical Catholic University of São Paulo, and works as a consultant for different UN agencies, governments and NGOs. His numerous publications and technical studies can be found on his website http://dowbor.org, free of charge (Creative Commons). A detailed account of what we present in the above paper can be found in a recent book, The Age of Unproductive Capital, Cambridge Scholars, 2019. Contact
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