Fernando Alcoforado*
This article aims to present the impacts that the ongoing global recession will have on the Brazilian economy and the solutions to deal with this gigantic problem and the internal economic stagnation. Several indicators give reason to believe that the global economy may indeed be evolving into a recession [CAVENDISH, Eduardo. Caminhamos para uma recessão global (We are heading for a global recession). Available on the website <https://www.infomoney.com.br/colunistas/eduardo-cavendish/caminhamos-para-uma-recessao-global/>%5D. Cavendish demonstrates this trend using 5 indicators: 1) PMI (US, China, World and Eurozone Purchasing Indicators); 2) Credit creation in China; 3) Industrial production in Europe; 4) Business profit growth in the United States; and 5) Cost of cargo transportation on major shipping routes in the world.
According to Cavendish, US, China, World and Eurozone Purchasing Indicators border on the economic downturn except the United States, the annual variation in credit creation in China shows current figures that are below the peak of the 2008/2009 crisis, industrial production growth figures in the major Eurozone countries show a rapid deterioration of activity that took place in the fourth quarter of 2018 including Germany which has the largest industrial park in the bloc, there is a decline in corporate profit growth United States and there is a drop in demand for cargo transportation on major trade routes in the world. Cavendish reports in her article that IMF Director Christine Lagarde said: “When there are too many clouds, lightning is enough to start the storm.” This would be the situation facing the world economy in the direction of the global recession.
The global recession could lead the world to economic depression that could happen when the stock market collapses, as can real estate, asset prices and all side bets. In addition to the global recession, the world financial system is collapsing with the inevitable collapse of the dollar. The prospects for the future are global recession, accelerated monetary inflation in the United States, followed by an international monetary collapse. According to the International Finance Institute report, global debt has risen to $ 243 trillion. This is a record amount three times the world GDP. When this multi-trillion dollar bomb of debt planted under the world economy explodes, the crisis will be worse than 2008.
If the global economy cannot digest this huge debt, the ensuing crisis will lead the world to economic depression, mass poverty, geopolitical instability, political unrest and war. While the international financial system is heading for bankruptcy, the world capitalist system is coming to an end in the middle of the 21st century because the profit rate of the world capitalist system and the World Gross Product will tend to zero by 2057 [ALCOFORADO, Fernando. Como inventar o futuro para mudar o mundo (how to invent the future to change the world). Curitiba: Editora CRV, 2019]. The scenario of global recession may also have negative consequences for Brazil, undermining the recovery of the domestic economy. In times of crisis, of great uncertainty, global investors tend to leave emerging markets, such as Brazil, which are considered more risky. Bolsonaro’s neoliberal economic policy may not be able to cope with a more severe international crisis. The existence of the neoliberal model in Brazil makes its economy vulnerable to the foreseeable ruin of the world economy.
As the world moves towards recession followed by economic depression, Brazil faces the obstacle represented by neoliberalism that has been devastating the country since 1990. The neoliberal economic model implemented in 1990 is largely responsible for leading Brazil to economic bankruptcy and gigantic social crisis today. The practice has been demonstrating the unfeasibility of the neoliberal economic model in Brazil inaugurated by President Fernando Collor in 1990 and maintained by Presidents Itamar Franco, Fernando Henrique Cardoso, Lula, Dilma Roussef, Michel Temer and Jair Bolsonaro.
Brazil’s main internal problem today is the stagnation of the economy with its consequences related to the closure of industries and commercial and service activities and, above all, the mass unemployment of 13 million workers and the underutilization of 28 million workers. President Bolsonaro and his ministers demonstrate that they are not effective managers as they do not spend their time working on what really matters to Brazil at the moment which is the reactivation of the economy and the fight against unemployment, do not focus their efforts on the desired results to the Brazilian people, which is the resumption of national development, and do not focus on the few large areas where superior execution will produce excellent results for the country, and do not outline strategies capable of eliminating or minimizing the impacts of global recession on the Brazilian economy.
To reactivate the Brazilian economy, the Bolsonaro government should preliminarily abandon the neoliberal economic model implemented in 1990 from which the federal government abdicated national economic planning. The neoliberal model, responsible for Brazil’s economic debacle, should be replaced immediately by the national developmentalist model of selective openness of the Brazilian economy with active state participation in economic planning, as occurred in the 1930-1980 period when Brazil reached its greatest economic and social development. The analysis of Brazil’s 10-year GDP growth rates from 1901 to 2010, projected from 2011 to 2020, undoubtedly shows that the best performance of the Brazilian economy with the highest growth rates occurred between 1930 and 1980, thanks to the active participation of the Brazilian state in promoting its development.
From 1990, the federal government abdicated from planning the national economy influenced by the neoliberal theses that considered that it was the market’s responsibility to promote the expansion of the economy. From 1990 to 2016, Brazil had very low GDP growth rates. Between 2011 and 2020, the Brazilian economy should advance on average 0.9% per year, according to FGV. This rate is lower than the 1.6% of the so-called “lost decade” in the 1980s. In 2015 and 2016, for example, GDP grew negatively by 3.5% and 3.3%, respectively. It was a negative milestone for the country’s economic history. Brazil had not had two consecutive years of recession since 1930 and 1931 when the world was affected by the effects of the 1929 economic crisis and the New York Stock Exchange crashed. Now Brazil is experiencing 5 years of recession with no prospect of a short-term solution. In the last two years, GDP has grown by only 1.1%. These numbers demonstrate the failure of neoliberalism from 1990 to the present time in Brazil. It is, therefore, an act of homeland damage to maintain the harmful neoliberal economic model for Brazil.
The federal government should elaborate an economic plan that contributes to the resumption of Brazil’s development that presents to the population and the productive sectors a perspective of overcoming the current crisis and resuming of economic growth. It is the absence of a government development plan that is one of the factors that lead to the immobility of the private sector in making investments in Brazil, leading to a real paralysis. The development plan should guide and coordinate companies in the country that, organized in networks and aided by trade, technology and credit policies, can successfully compete in the national and global economy.
It is urgent that the Brazilian State take the reins of the national economy by abandoning the failed neoliberal economic model to reactivate the Brazilian economy and full employment. The Brazilian government should consider as a number one priority to reactivate the economy with the immediate execution of a broad program of public infrastructure works (energy, transportation, housing, sanitation, etc.) with the participation of the private sector to combat the current one mass unemployment by raising household and corporate employment and income levels, thereby promoting the expansion of household and corporate consumption resulting, respectively, from the increase in household wage bill and corporate income from investments in public works to make Brazil grow back economically.
In addition to the public works program, the Brazilian government should develop a broad export program, especially in agribusiness and the mineral sector, drastically reducing bank interest rates to encourage household consumption and corporate investment, reducing the burden with the freezing of high wages in the public sector, the cutting of stewardship and public administration agencies, and the fall in interest and amortization charges on public debt to be renegotiated with public debt creditors for the government to dispose of resources for investment in economic and social infrastructure. Without the adoption of this strategy, Brazil will inevitably lead to economic ruin and political and social upheaval.
This whole set of measures should be implemented based on the planning of the national economy that will ensure the country’s economic growth and development on a sustainable basis. With the national developmentalist economic model of selective opening of the economy, the Brazilian government should adopt a policy capable of overcoming as soon as possible the current obstacles represented by technological dependence on the outside. This challenge will only be overcome if the federal government develops a lot of effort and determination alongside the national productive sectors, R&D centers and universities to develop their own technology to substitute imports and / or to import technology from countries with which strategic alliances will be made on a sovereign basis. It should be noted that the national developmentalist economic model of selective opening of the economy is the antithesis of the neoliberal model in force because it privileges national interests rather than those of the market.
Faced with the need to strengthen the Brazilian state to plan the national economy, the Brazilian government should suspend the payment of domestic public debt for a period of 5 years or renegotiate with its creditors in order to lengthen its payment so that the government will have the necessary resources for public investments aimed at reactivating the economy. This solution is unavoidable because almost half of the Union budget is spent on servicing domestic public debt. Taking into account the speech of the Minister of Economy of the government Jair Bolsonaro, Paulo Guedes, who is a fundamentalist of neoliberalism, it is unlikely that the federal government will assume an active role as an inducer of economic growth, elaborating a development plan with the adoption of the above measures to promote the reactivation of the economy and the rise in employment levels in Brazil. Very hardly, the Bolsonaro government will adopt the above measures because it is submissive to the interests of the United States government and international capital, and is dominated by neoliberal blindness.
To bring the Bolsonaro government’s economic policy into line with the nation’s interests, a political front must be set up to mobilize the population in defense of the country’s economic progress in Parliament and civil society and to fight government acts that are contrary to the interests of the vast majority of the population and Brazil.
* Fernando Alcoforado, 79, awarded the medal of Engineering Merit of the CONFEA / CREA System, member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associação Baiana de Imprensa, Salvador, 2018, em co-autoria) and Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019).
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