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Brazil: The "brake" is COPOM.

by Bernardo Kucinski Tuesday, Feb. 27, 2007 at 4:01 PM
kucinski@ig.com.br

The logic of the the Growth Acceleration Program opposes classic economists as Michael Kalecki and John Keynes. The GAP that does not contain a expansionist monetary politics is not the GAP, is the anti-GAP, as, by the way, the last act of the Copom made clear.

Brazil: The "brake" is COPOM.

Speculations around the logic of GAP.

The logic of the the Growth Acceleration Program opposes classic economists as Michael Kalecki and John Keynes. The GAP that does not contain a expansionist monetary politics is not the GAP, is the anti-GAP, as, by the way, the last act of the Copom made clear.

Bernardo Kucinski

The Brazilian economy can perhapps grow five percent this year, or more. But not because of the Growth Acceleration Program, the GAP.

While the basic real interest of the economy is kept in the anomalous platform of 10% to the year, there is no growth speech that can make the country to grow. All economists know that. They do not depend on their school of economic thought, if marxist, monetarist, Keynesian or neokeynesian.

After the law of the comparative advantages of David Ricardo, and of the capital of Marx, it was the discovery of the basic relation between growth and tax of interests, made simultaneously for Michael Kalecki and John Keynes, tha contributed more to institute the economic thought in scientific knowing.

Ricardo had shown that, in contrast of what kings and governing had believed during 300 years, the more a economy concentrates itself in the production of those goods in which it is more efficient, changing its excesses for merchandises that other countries produce better, plus it progresses, more value it produces with use of the same production factors. That's why we can say that the international trade creates value.

During 300 years, the kings only saw the appearance of the foreign commerce: the more the country had to import, less gold remained in its safes, then they had little to finance its wars of conquests. During 300 years they had believed that the gold was the proper value, without perceiving that more lands and work werw used each time to obtain the same amount of value.

Kalecki, a marxist, and Keynes, a antimarxist, had demonstrated for totally different methods that the intensity of the activity of a economy is directly proportional to the income of the people and inversely proportional to the interest rate.

The bigger the interest rate, minor the propensity to investment from the capitalists and minor the propensity to consumption from the workers, greater the unemployment and the idleness in the plants.

If Brazilian Central Bank is paying so high interests to whom invests in its papers, much better to support a little longer the used car and to let the money in the bank. Or to pay the rent with the income of the saving account and not to construct that house. The companies think the same way. What for to face the risk of expanding production, to construct plus a shed, if the money is growing faster in the bank?

GAP is an attempt to make the capitalism to grow moving it all but not in the main thing, that is the basic interest. Triyng to compensate the mistake, the government adopted a monetary politics, opposing to the main one, that stimulates the consumption through collateralized loans of wage, the consigned loans. But exactly these charge usury interest, of the order of 25% to the year.

It must not work. Exactly because, in the Brazilian case, the highest basic interest paid by the Central Bank of Brazil also (a) knocks down the quotation of the dollar, stimulating the substitution of national production for imported production, what it stimulates the growth in other countries, not in ours, and (b) raises much the cost of the public debt hindering the government to invest.

The logic of the GAP opposes the classic economists. The GAP that does not contain a expansionist monetary politics is not the GAP, is the anti-GAP, as, by the way, the last act of the Copom made very clear. If the logic of the GAP is not of the classic economists, which is its logic? Or the GAP was born of a knowledge different of the real world as the one handled by the classic economists, or GAP has its origin in interests of social sectors or groups that overlap this logic.

I remember that it was common, in the times of the great strikes of the ABC, the syndical controllers to argue in the assemblies of the metallurgist that the plants of vehicles could give bigger increase of wage without raising the prices of the cars, because the wage was only 10% of the cost of a car.

They saw only what was apparent, the weight of the wage in the matrix of costs of assembly plants, and not its essence, that in all the parts and components also were inlaid or added a wage cost. Everything would also increase with an increase of wages of the metallurgist. And that was much more than 10% of the total cost of an automobile.

The most likely is that our leading elite of syndicalistic origin understands and explains the economy as a pragmatic vision that (a) it is lead much more for the appearances of the economy then for the not visible mechanisms of the economic processes and (b) it tries the maximum of profits for its proper electorate, the Brazilian poor people and specifically the organized workers, with the minimum of facing to the dominant interests.

It is the same old logic of the negotiation in strike time. The GAP tries the way of lesser resistance. To grow without facing the domain of the bankers on ours monetary politics.

To be only in the apparent knowledge, without questioning if this knowledge is true or false, it is typical of popular knowing and the opposite of scientific knowing.

It is as to say that the Sun runs around the Land because it is what we see every day. However, science has said them, and proved, that it is Land that turns around the Sun. Galileu almost was burnt because of this. The same illusion for the apparent one seems to inspire declaration of some leaders of the PT that it was thanks to this economic policy that Lula was reelected. It is what it seems. But this is but the apparent thing.



The fall in the food prices would have been obtained in the same way, without a deceleration politics and with the advantage to create much more jobs. It is possible against-to argue alleging that the economy is not a science of the nature, in the direction to explain in univocal way as the nature functions and yes ethics that it claims as the economy would have to function to well take care of the human necessities.

Therefore, its rules differ when they jump from a school of economy tor another one. But, exactly thus, no school of economy disagrees with the teses of Keynes and Kalecki of that the bigger the interests rates, the minor the economic growth for one same income. It is treated, therefore, of a basic relation between two economic variables. Therefore, the GAP is not a national project of development. But a set of measures that trie to stimulate the growth without facing with the great capital.

The GAP is also unaware of that the growth is cyclical. It starts, it expands itself and it exaures eventually itself. The expansion cycles last, in generality, from five to seven years. There are oscillations inside of a bigger period, of 25 years, the famous long waves of Kondratief. And, inside of the expansion cycle, there are smaller oscillations, that do not modify its expansionist direction.

That is, the capitalism can be everything but a well held system, in which you say that it will grow 0.5% and it grows 0.5%. Not by chance, China grows the ten percent, unmanageable, and Argentina 8 or 9%, also furiously. It is almost as a “or everything or nothing”. Or you grow or you are skidding in the so called “stop and go”, as we've been for almost three decades.

Who argues if it is posible to grow 4.5% or 5%, or, who knows, 4.75%, does not really want the economic growth. They reason by the same logic of the boys from Copom, who, as we know and as was proven by its last act, do not want the economic growth. Growth happens when the idle factors of production are set free and some of them enter in sinergy. When the hunger gets together with the will to eat. Nobody can stop it. We have some idle factors of production: qualified manpower and not qualified persons insane for a job; capital blowing up in the safes of the banks and the companies; idle capacity of about 23% in the industries; culturable lands to lose of sight; energy still by accessible costs. When there is idle factors of production, is enough to free the brakes. The brake is Copom.

Bernardo Kucinski, journalist and profesor of the University of São Paulo, is publisher-associate of "Carta Maior". He is author, among others, of “The syndrome of the parabolic antenna: ethics in the Brazilian journalism " (1996) and “The Acid Letters of the campaign of Lula of 1998” (2000).

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