In his Sunday column, Samuel Pessôa presents interpretations for the 2008 and 2020 crises, as well as for the 2014-2016 crisis. While the first two would have exogenous causes, the last one would have endogenous causes to the Brazilian economy. In exogenous crises, the GDP trend recovered its previous trajectory, while in the endogenous crisis there was a permanent drop in the growth rate. The author presents “two interpretations” for the 2014-2016 crisis, one heterodox and the other neoclassical.
Our unorthodox interpretation differs from Samuel’s. First, it should be noted that the 2014-2016 crisis is linked to the 2008 crisis. The changes that took place in the world economy interrupted the growth regime led by the increase in the share of wages in income and stability or increase in the rate of profit. As can be seen in the graph, between 2003 and 2007 there was an increase in the salary share and in the Ibovespa deflated by the IPCA.
The first Dilma Rousseff administration responded to the change in the international scenario with a policy of stimulating private investment with tax exemption and interest rate reduction. There was a fall in the unemployment rate that increased the ability of workers to earn wage gains above labor productivity. This resulted in the reduction of the profit rate at the same time that it reduced the price competitiveness of the industry’s production, accentuating the premature deindustrialization process, which diminished the potential growth of the economy.
The government’s economic team did not see the effect of the profit squeeze on private investment. She also underestimated the impact of deindustrialization on potential growth. The result was a slowdown in growth between 2011 and 2013, followed by a “sudden stop” in investment from the second quarter of 2014, to which the Lava Jato operation made a not inconsiderable contribution. The subsequent fiscal imbalance was the consequence, not the cause, of the slowdown in growth. The graph shows that between 2009 and 2015, the share of wages in income increases while the real Ibovespa decreases.
The origin of the 2014-2016 crisis lies in the crushing of profits, which led to the collapse of investment. The change in economic policy in 2015, which deepened the recession that began in 2014, aimed to reduce the bargaining power of workers through the increase in unemployment resulting from the adoption of a policy of “fiscal austerity” combined with an increase in the rate of fees.
In the Temer and Bolsonaro governments, contractionary policies were combined with “structural reforms”, such as the “labor reform”, whose objective was to reduce the cost of work and thus promote an increase in the rate of profit. Although this has in fact increased, leading to a real increase in the Ibovespa, the maintenance of austerity policies limited the growth of industrial production, deepening the process of deindustrialization, acting to reduce labor productivity in the Brazilian economy.
The economic stagnation from 2017 onwards stems from a short-sighted economic policy that seeks to recover the rate of profit through overexploitation of the workforce, rather than promoting a structural shift towards sectors where labor productivity is higher, that is, industry and services linked to industry.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
