Are we discussing the role of the State?

It is not to be expected that, with just over 5 characters spread across less than two pages, one can present, with the appropriate comprehensiveness, an economic program to pull a stagnant country out of the quagmire, a country subjected to an annual erosion of purchasing power exceeding 10%, with 12,9 million people seeking work, out of a total of 29,9 million people who want and can work, but whose workforce is underutilized.

It is plausible, however, to expect that the four individuals interviewed by the Folha de S. Paulo newspaper—former ministers and professors—chose to highlight what they felt was essential to bring to public attention. They knew their articles would be scrutinized for a variety of purposes.

The following exercise is an attempt to highlight what stood out in each proposal and then to explain the main foundation and the economic theory from which the advisors of the main opposition pre-candidacies for the election at the end of this year are based.

"The starting point for fixing Brazil is to grow while reducing inequalities."

The article by engineer Henrique Meirelles, under the title above, seems to stem from a diagnosis common to all participants in the political game: Brazil needs to "return to growth and reduce the enormous social inequality."

He argues that reducing social inequality requires increasing employment and workers' wages. Furthermore, he adds that achieving less inequality also requires the country to generate wealth and taxes for income transfer programs.

In short, the underlying idea is that by returning to growth we will generate more jobs, and by collecting more taxes we will enable income transfers to the most vulnerable. With more jobs and these transfers, we will reduce inequality. But how do we do this?

Meirelles suggests that the solution lies in investment. He says that "accelerating growth depends on increasing the investment rate – which is substantially lower than the average of neighboring countries." Could one conclude, then, that his priority would be to increase public investment, given that governments lack the power to dictate that the private sector should do so?

Well, here the former minister and former banker equivocates: increasing the investment rate and, consequently, providing productivity gains "presupposes the majority participation of the private sector, which demands focus and better quality of state action," he explains.

The plan leads us to the same dead end we've been in since 2015: we won't see vigorous growth anytime soon if we depend exclusively (or even mostly) on private investment.

The diagnosis seems to coincide with those of other advisors to the pre-candidates. When it comes to promoting investment, it dismisses the leading role of the State. Therefore, the low investment scenario of the last 7 years, it seems to us, will likely persist.

Two excerpts from Meirelles' article also resonate. What exactly did he mean by "changes require budgetary flexibility" and "the State needs to be strong (not necessarily large)"? Does budgetary flexibility mean the end of the spending cap that he himself implemented when he was a minister under Temer? Or does it mean being able to invest less and less in education, health, and social protection? Does dismantling Petrobras, which for years was the biggest driver of investment in Brazil, mean making the government smaller, weaker, or both? What, concretely, did he have in mind when he wrote "strong State, but not large"?

"See the basis for Sergio Moro's government program"

Affonso Celso Pastore understands that the central goal of the government program should be "growth that is both inclusive and sustainable." This aligns with the other articles: growth and the reduction of inequality are the central objectives. However, it also includes, with emphasis, the defense of the environment.

He understands that growth depends on "an improvement of institutions" and that "in the economic field, the most important necessary condition for regaining growth is the establishment of a fiscal framework."

He doesn't directly state that he's against the spending cap, but he says that during periods of low growth the government should have the capacity to invest more. This certainly doesn't align with the straitjacket imposed for 20 years. He states:

"During economic cycles, the government must have the capacity to implement countercyclical fiscal policy, but in 'normal times' it must keep public debt at sustainable levels, which requires controlling spending."

Your article clearly demonstrates a striking characteristic of conservative economic thought: by taking care of the business environment, ensuring legal certainty, and managing public finances, productive private investment will be stimulated and the economy will grow.

Although the stimulus provided by the governments of developed countries has been essential for them to reach the positions they occupy, and continues in many cases, these conservative economists believe that growth will occur with private companies playing a leading role.

When a country doesn't grow or experiences near-zero growth, as has been the case here for years, proponents of this line of economic thinking refuse to admit that the flaws lie in their project. They point to other culprits, such as the need for more reforms, insecurity, the size of the state, and so on.

In three instances, Pastore gives us a brief glimmer of hope for a breath of fresh air in his beliefs:

"The other pillar of the program is the commitment to the environment, which, in addition to its intrinsic value, brings political and economic dividends."

"In the social field, as well as in the economic one, the world has already abandoned the myth of the 'minimal state,' as it was idealized by Thatcher and Reagan."

"Our tax system needs to be improved by eliminating regressive taxation."

Is he really suggesting increasing the tax burden on the wealthiest? Or does he simply want to reduce taxes on the poorest and continue cutting spending on healthcare (what would be the "objective orientation in healthcare" he proposes?), social assistance (what would be the "early childhood assistance" he proposes?), education, etc.?

"It takes courage to change a failed economic model."

Although it also aims to grow and generate good jobs, reduce inequalities and improve social indicators, Nelson Marconi's article differs by explicitly outlining the intended fiscal solution: reducing subsidies and exemptions and, above all, instituting "progressive taxation on profits and dividends, inheritances and assets, compensatingly reducing the tax burden on production".

The new tax arrangement would provide room for a plan "agreed upon between the public and private sectors" that would foresee "both scientific and technological development and the reduction of inequalities and the improvement of social indicators, which will recover with the improvement in the quality of jobs, educational advancement and specific policies for the most disadvantaged."

Marconi praises the economic policies of Asian countries, especially China, for their extensive use of planning and scientific and technological development policies. The leading role of the state with a developmentalist (or neo-developmentalist) orientation, advocated by him, is in clear opposition to the ideas of Meirelles and Pastore. The success of his project, however, depends on broad support from Congress.

Bolsonarism led Brazil to crisis, and recovery will come with its end.

Considering the avalanche of distortions and falsehoods regarding the governments in which Guido Mantega participated, even coming from prominent economists, it doesn't seem unreasonable that he begins his article by defending his legacy. The former minister recalls that:

“Between 2003 and 2014, Brazil's GDP grew at an average rate of 3,5% per year, while unemployment fell to below 6% of the economically active population. At the end of 2014, Brazil was a relatively low-indebted country, with net public debt equal to 32,5% of GDP, while the Central Bank held reserves of US$374 billion.”

Perhaps what most distinguishes Mantega is that his program does not forgo emergency measures to alleviate the hunger and poverty that afflict a large portion of Brazilians. Other actions received little detail and little space. However, his confidence in the leading role of the State in achieving growth while reducing inequality is evident.

An ambitious plan of public and private investments, focusing on infrastructure and increased productivity, a tax reform that increases the tax share of the wealthiest, the resumption of industrial and technological development policies, as well as attention to climate and environmental issues, summarize the project designed by Mantega. Just like Marconi's project, its success depends on support from Congress.

To persist in error or to innovate?

From the four articles, it is possible to identify two groups. One with neoclassical (neoliberal) roots, formed by Meirelles and Pastore. The other, developmentalist (Keynesian), formed by Marconi and Mantega. It also seems that the core of the discussion between the two groups lies in the leading role of the State in guiding the course of the economy.

From this point, a comparison with history since the post-war period, regarding development and general well-being, can be made.

Is it appropriate to continue using the formulas of the last forty years, repeated ad nauseam, which presuppose abandoning the role of the State as a driver of development and losing its instruments to fulfill that role? Has it not yet become clear that such management of the economy always ends up delivering an unparalleled concentration of wealth and income and mediocre growth?

On the other hand, is it anachronistic to revisit formulas that were overturned by the difficulties that developmentalism, with state leadership, encountered in the 1960s and 1970s? Isn't the post-war years almost unanimously referred to as golden years? Isn't the improvement in workers' well-being, at least in developed nations, during the long period preceding the adoption of the neoliberal paradigm undeniable?

Ultimately, it seems that the question is how long the formula that claims to promote development and equality, but delivers, above all, the concentration of income and wealth, will continue to sway voters.