Opinion – Samuel Pessôa: Edmar Bacha explains ‘Not to forget’

Last Monday (30) Insper launched the book “Not to forget: public policies that impoverish Brazil”, organized by Marcos Mendes with 25 chapters that review policies adopted in recent decades.

Edmar Bacha presented the contents of the book at the event. I share with my readers Bacha’s observations, which he calls “polytimetrics”.

“The first observation is that half of the policies analyzed in the 25 chapters of the book deal with misguided expansions of public spending, which do not pass an analysis of social costs and benefits; the other half with policies that distort the allocation of resources, reducing well-being Social.

A second observation is that 2/3 of these policies were implemented between 2003 and 2012. If we add them to the previous bad policies that continued in this period, we reach the conclusion that 80% of the wrong policies analyzed in the book took place during the PT governments.

These are policies that were applied in the name of the so-called national-developmentalism. It is a vision of economic policy that has four aspects, all harmful. The first is the idea that “spending is life”, which justifies fiscal-monetary expansionism. The second is statism, which justifies public companies. The third, interventionism, which justifies the interference of the public sector in the private sector. The fourth, protectionism, which justifies the closure of the economy.

The period 2003-2012 had two characteristics. The first one already mentioned is that they belonged to PT governments. The second is that it was during this period that the commodities super boom appeared, associated with the discovery of the pre-salt layer.

It was from the combination of the PT’s wrong economic ideas and the abundance of resources in the hands of the government that most of the wrong policies analyzed in the book resulted. The union of wrong ideas with money in hand is explosive. It provoked here the “voracity effect” that the literature on the curse of natural resources deals with.

The fact is that these misconceptions are still around and could rise to power again from 2023 onwards. Only in this case it will be without money in hand – money that, in the commodities super boom, prevented these misguided policies from having effects even further. inflationary and were even more damaging than they once were.”

(My observation: in last Saturday’s column (28), in the IFI —Independent Fiscal Institution—graph of the evolution of the central government’s primary surplus, the blue bars represent the effect of the commodity boom on public accounts.)

“Taken forward in the challenging external environment that appears for the next few years, such ideas could lead the Brazilian economy to complete disaster, in the style of Argentina or Venezuela.

Hence the importance of this book. Give ammunition to enlightened people who are in a possible new PT government –if this is the alternative to the bolsonarista debacle that we all want to rid– to prevent the repetition of the rosary of misguided policies implemented between 2003 and 2012. Even better if the book has the effect of leveraging a third political path (now represented by the very welcome candidacy of Simone Tebet), because then we could get rid of once as much left-wing populism as right-wing populism.

And thus resume the progressive and liberalizing economic reforms that characterized the FHC government. These reforms are well described in the 30 episodes of Casa das Garças podcasts on the Art of Economic Policy.”

​The book can be downloaded for free from this website.