On January 20, Martin Wolf, today’s leading economic commentator, published a brilliant article in the Financial Times, defending democratic capitalism. The theme is both old-fashioned and beyond hot. Democracy and capitalism are notoriously imperfect, but they are by far the best arrangements ever constructed in each field.
Wolf argues that “liberal democracies are the most successful societies in human history, in terms of prosperity, freedom and the well-being of their people. But they are fragile”, and may lose their legitimacy if the population feels bad represented in politics or poorly served by capitalism (and by the State, I say). In these cases, often in both, the risk of falling into plutocratic regimes (in which money is concentrated in a few hands is in charge) or autocratic (in which power is concentrated through populism and freedom is impaired) increases.
The essence of both systems is competition between parties and between companies “in the context of rules and values internalized by society and incorporated into laws”. This mechanism depends on a delicate little plant called trust, which is difficult to build and easy to lose.
The fundamental condition for liberal democracy and market capitalism to survive is to succeed in promoting continuous improvements in people’s quality of life, shared by the majority. In particular, there must be an expectation of social mobility for all, in the form of opportunities and some social protection, which is a pillar of the welfare state.
And we, how are we doing here in Brazil? In April 2019, this Sheet invited me to write a monthly column. Since then, I have tried to focus on the challenges we have to overcome in order to hitch our wagon onto the train of development. As Nobel Prize-winning Professor Robert Lucas of the University of Chicago put it, “Once you start thinking [no desenvolvimento das nações]it’s hard to think about anything else”. It’s my case.
As there is much room for improvement in practically all areas in Brazil, in theory it should be possible to organize our political and economic life in such a way as to accelerate growth and, thus, bring our standard of living closer to that of the most advanced economies, which does not has been happening for decades.
During these years in Sheet, I tried to argue that development in a broad sense requires the reduction of our huge inequalities, not “only” for ethical reasons but also to avoid the losses of trust highlighted by Wolf, with their serious risks of backsliding. Therefore, it is essential to invest in human capital, especially for the poorest, which reinforces growth. Therefore, as I have been insisting since 2019, there is no incompatibility here between the objectives of growing and reducing inequalities, quite the contrary.
A necessary condition for a prolonged cycle of development to materialize is the existence of a State that fulfills its public role well, that is not captured by the interests of powerful minorities, an old problem here, and that is capable of processing over the long term time and within a framework of macroeconomic stability the legitimate demands of an extremely needy and unequal society.
These challenges take us back to the political field, where the picture is second to the economic one. The dysfunctional polarization that collapsed on January 8 needs to be replaced by more moderate positions that clearly occupy the ideological spectrum. The political environment must stop being a source of uncertainty that inhibits economic activity.
It will not be easy. A significant portion of voters distrust our institutions and would support a coup. Fortunately, the command of the Armed Forces remained faithful to the constitutional rule of law and did not embark on an adventure doomed to failure.
Now, there are good reasons to hope that the institutions will be led by actors willing to make clear, through due legal process, the barbarities that have marked the last few years in the country. This step must be accompanied by revisions to the legal framework that our elected representatives deem necessary.
An important novelty in the political space appears to be the emergence of a relevant portion of the electorate that exhibits moderate right-wing preferences. My hope is that the left in power today puts aside the us against them and the outdated idea that capital gains can only come at the expense of the exploitation of workers.
In a competitive economy, capital is rewarded for the risk it takes and the results it generates, not for the benefits gained through intimate relationships with the government. As such, the benefits of increased labor productivity are distributed to workers. In other words, the relations between capital and labor are not a zero-sum game, as they create and share value. The millions of small business owners working in Brazil understand this better than anyone else.
It is up to the government and the State to ensure an environment in which this machine for generating prosperity works well. A market capitalist system operating under the auspices of a liberal and solidary democracy should be able to prevent abuses of economic power. After all, the majority should elect a government capable of eliminating such abuses and allowing the market, the mainspring of development, to function properly.
In Brazil, capitalist democracy needs to be perfected in politics and economy. One is not enough. This is the great challenge for Brazil’s political and economic elites. The future we want for the country depends on its success.
This is my last column in this space. I leave here my thanks to those who accompanied me and to the Sheet for impeccable hospitality.
I have over 10 years of experience working in the news industry. I have worked for several different news organizations, including a large news website like News Bulletin 247. I am an expert in the field of economics and have written several books on the subject. I am a highly skilled writer and editor, and have a strong knowledge of social media. I am a highly respected member of the news industry, and my work has been featured in many major publications.